JPMorgan: Ether, Altcoins May Lag Bitcoin Without More Activity

JPMorgan analysts wrote in a report that ether and many altcoins are likely to continue underperforming bitcoin unless Ethereum records significant growth in network activity, decentralized finance use and real‑world applications.

The analysts pointed to spot ETF flows and institutional futures positioning following the market selloff tied to the Iran conflict. Spot bitcoin ETFs have recovered about two‑thirds of prior outflows, while spot ether ETFs have recovered roughly one‑third.

On futures markets, CME bitcoin futures positioning has nearly returned to pre‑selloff levels, whereas ether futures positioning remains below earlier levels. Momentum‑focused traders, including commodity trading advisors and crypto quant funds, remain slightly underweight both bitcoin and ether after last October’s deleveraging.

JPMorgan questioned whether Ethereum upgrades expected this year, named Glamsterdam and Hegota, will be enough to change ether’s relative performance. The report says upgrades over the past three years mainly reduced Layer‑2 transaction costs and did not produce sustained increases in on‑chain activity.

Those cost reductions lowered fees on the Ethereum base layer and weakened the fee‑burn mechanism that had removed tokens from circulation. Lower base‑layer fees mean fewer tokens are burned, a dynamic the bank wrote could contribute to higher net supply unless demand rises.

The analysts wrote: “And this underperformance trend that started in 2023 is unlikely to change unless we see meaningful improvements in network activity, DeFi and real world applications.”

The report added that the key question for Glamsterdam and Hegota is whether higher throughput and lower base‑layer costs will attract enough new on‑chain demand to offset reduced fee burns.

JPMorgan outlined wider headwinds for many non‑bitcoin tokens, including weaker liquidity, thinner market depth, limited growth in DeFi activity, and repeated hacks and security breaches. The analysts noted these factors have reduced investor confidence and discouraged fresh capital inflows into a range of altcoins.

The report states that absent increased on‑chain usage, greater DeFi engagement and more real‑world applications, institutional flows and futures positioning could continue to favor bitcoin over ether and other altcoins.