Ethereum (ETH) Dominance Faces Challenge as JPMorgan Analysts Suggest Increased Competition is Eroding Market Share

Ethereum's ETH/USD dominance in the cryptocurrency space is facing a significant challenge, with analysts at JPMorgan suggesting that increased competition from rival blockchains is eroding its market share and threatening its long-term prospects.

Cryptocurrency enthusiasts have been closely monitoring the shifting dynamics within the digital asset realm, and recent insights from JPMorgan analysts suggest that Ethereum's dominance in the cryptocurrency space is facing a formidable challenge.

According to a report led by JPMorgan's managing director Nikolaos Panigirtzoglou, ETH has notably underperformed both Bitcoin and a range of alternative cryptocurrencies since the recent U.S. election, signaling a concerning trend for investors, as reported by The Block on Thursday.

JPMorgan analysts primarily attribute Ethereum's struggles to two key factors:

Despite Ethereum's recent Dencun upgrade, which aimed to enhance scalability, transaction activity has predominantly shifted to Layer-2 networks, largely to the detriment of Ethereum's own activity.

Moreover, the migration of top decentralized applications to application-specific chains has emerged as a concern, as this move could potentially reduce Ethereum's fee revenue and increase the risk of the network becoming inflationary due to reduced token burn.

While Ethereum still maintains its leadership in the realm of stablecoins, decentralized finance (DeFi), and tokenization, the analysts express uncertainty regarding its ability to sustain this dominance.

Recent initiatives to bolster institutional adoption are acknowledged, but the JPMorgan team concludes that "competition from other networks is likely to remain intense in the foreseeable future."

This observation aligns with recent data from Dune Analytics, which indicates that Layer-2 networks have outpaced Ethereum's mainnet in terms of daily transaction volume since August 2022. Notably, Arbitrum and Optimism have emerged as the leading Layer-2 solutions, collectively processing over 1 million transactions per day.

Meanwhile, Ethereum's mainnet has averaged around 700,000 transactions daily. This disparity highlights the increasing adoption and utilization of Layer-2 networks within the Ethereum ecosystem.

The news comes as Ethereum has slipped below the $3,000 threshold, plummeting as low as $2,200 on Monday. Notably, the second-biggest cryptocurrency has yet to set a new all-time high since 2021, lagging behind Bitcoin and Solana to the disappointment of investors.