JPMorgan: Ethereum will surpass Bitcoin in 2024
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JPMorgan: Ethereum will surpass Bitcoin in 2024
The Bitcoin halving and DeFi's "maximum disappointment" will also impact the cryptocurrency market, while the venture capital outlook will improve.
Navigating Web3 tides with focused insightsBy Yogita Khatri, The Block
Translated by Kate, Mars Finance
Key Takeaways
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JPMorgan analysts say Ether could outperform Bitcoin and other cryptocurrencies in 2024.
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The prediction comes ahead of Ethereum’s EIP-4844 upgrade next year.
JPMorgan expects Ether to outperform Bitcoin and other cryptocurrencies in 2024, even as the bank remains overall "cautious" about the crypto market over the next year.
"We believe that ETH will reassert itself next year and reclaim market share within the crypto ecosystem," JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report on Wednesday. "The main catalyst is the EIP-4844 upgrade, or Protodanksharding, expected in the first half of 2024. We believe this upgrade could be a significant step toward improving Ethereum network activity, helping it outperform."
Protodanksharding is the first phase toward full Danksharding implementation, a more efficient form of Ethereum sharding. Unlike the originally planned sharding approach, Danksharding avoids the complexity of splitting Ethereum into multiple shard chains. Instead, it introduces data blobs—temporary data packets attached to blocks—that can hold more data than regular blocks but are not permanently stored or accessed by the Ethereum Virtual Machine.
JPMorgan analysts reiterated that this upgrade would be particularly beneficial for Layer 2 networks such as Arbitrum and Optimism, as it provides additional temporary data space to increase network throughput and reduce transaction fees on Ethereum Layer 2s. In essence, data blobs enhance Layer 2 efficiency without changing the size of Ethereum blocks.
Bitcoin Halving Already Priced In
JPMorgan analysts said factors viewed as bullish for Bitcoin next year—including potential approval of a spot ETF and the upcoming halving—have already been priced into the market.
The analysts noted that after the 2020 halving, the ratio of Bitcoin's market price to its production cost declined, and a similar move following the 2024 halving would be reasonable.
"Given that the current ratio of Bitcoin price to production cost is around x2.0, this implies that the 2024 Bitcoin halving is largely priced in," they concluded.
DeFi's 'Biggest Disappointment'
JPMorgan analysts said DeFi's "biggest disappointment" remains its inability to penetrate traditional finance—a necessary step for the crypto ecosystem to transition from native crypto applications to real-world use cases.
"The largest application of blockchain in traditional finance—overnight repo transactions via smart contracts on blockchain platforms hosted by firms like Broadridge and JPMorgan—occurs outside public blockchains," the analysts said. Moreover, progress on tokenization has been "quite slow," remaining in "largely experimental stages, hindered by fragmentation, lack of collaboration and interoperability between platforms, delayed central bank digital currency (CBDC) rollouts by the Federal Reserve and European Central Bank, and regulatory uncertainty," they added.
Crypto Venture Capital Outlook
Although venture capital funding in the crypto sector improved in the fourth quarter compared to the generally weak levels seen earlier in the year, JPMorgan analysts view this improvement as "rather temporary."
"That said, if this improvement persists into Q1 2024, it would represent significant progress and, in our view, signal the end of the crypto winter," they said.
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