Analysts at the world's largest bank expect Ethereum (ETH) to outperform Bitcoin (BTC) next year due to a crucial network upgrade in the former and a completely disappointing ETF launch in the latter.
In a report published on Wednesday, JPMorgan argued that Ethereum's upcoming “Protodanksharding” (EIP-4844) upgrade will help bolster network activity after a lull in which Ether (ETH) has underperformed other cryptos.
Ethereum's impending comeback
Protodanksharding, expected in April, marks a first step before the full implementation of “Danksharding” – a scaling technique that will strengthen Ethereum’s Layer 2 networks with more transaction throughput and lower fees.
“We expect Ethereum to outperform Bitcoin and other cryptocurrencies next year, supported by the upcoming EIP-4844 upgrade or Protodanksharding,” analysts led by Nikolaos Panigirtzoglou wrote in a report shared with CryptoPotato.
The prediction echoes that of British banking giant Standard Chartered in October, which predicted an ETH price of $8,000 by 2026, partly due to technical upgrades such as Danksharding.
So far, JPMorgan has described Ethereum network activity as disappointing. Since the Shanghai upgrade in April, activity has not seen a significant uptick beyond staking, despite a resurgence in DeFi and NFTs on other networks.
One such alternative network is Bitcoin, which is gaining traction as a new platform for NFTs and tokenization thanks to its newly popular Ordinals protocol. During times of peak activity, the transaction fees charged by Bitcoin begin to compete with those of Ethereum, which is unusual.
Bitcoin VS. Ethereum
Based on price action, BTC is up 158% year-to-date, while ETH is up 90%. However, according to JPMorgan, the former's outperformance is unlikely to last – despite upcoming key events that are widely expected to trigger further gains.
“Over-optimism among crypto investors due to an impending SEC approval of spot Bitcoin ETFs has catapulted Bitcoin to 2021’s overbought levels,” the analysts argued.
Although many claim that a series of Bitcoin ETF approvals could attract more institutional capital to BTC, the bank believes that capital will simply be diverted from existing Bitcoin investment vehicles: Grayscale, futures ETFs, miners and others.
As for the April Bitcoin halving, JPMorgan says the event is already priced in based on the current cost of BTC production for miners.
“Given that the current ratio of Bitcoin price to production costs is currently around 2.0, this would mean that the Bitcoin halving in 2024 is largely factored into the price,” analysts wrote.
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