Ethereum and competing coins continue to underperform Bitcoin! JPMorgan: Unless "on-chain activity heats up," a turnaround will be difficult

After experiencing geopolitical shocks, the cryptocurrency market has seen a rebound, but JPMorgan Chase (JPM) stated that market funds still favor Bitcoin. If Ethereum and competing coins continue to lack breakthroughs in practical application scenarios and activity levels, the weak trend that has persisted since 2023 and has underperformed Bitcoin may be difficult to reverse.
JPMorgan analysts issued a warning in their report that, although the recent crypto market has gradually recovered after a sell-off triggered by Iran-related geopolitical conflicts, the gains of Ethereum and competing coins still lag significantly behind Bitcoin. Led by JPMorgan Managing Director Nikolaos Panigirtzoglou, the analysis team pointed out:

Unless we see substantial improvements in on-chain activity, DeFi, and real-world application scenarios, this weak trend since 2023 is unlikely to change easily.

Bitcoin Nears a “Full Recovery”
The report states that during this market recovery, Bitcoin has shown more resilience than Ethereum in terms of fund flows into spot ETFs and institutional futures positioning.
Currently, Bitcoin spot ETFs have recovered about two-thirds of the net outflows during the previous sell-off; in contrast, Ethereum spot ETFs have only managed to recover one-third of their losses.
Additionally, in CME futures positioning, institutional exposure to Bitcoin has nearly returned to pre-drop levels, while Ethereum futures open interest remains low. Analysts added that, affected by the deleveraging event last October, momentum traders—including CTA and crypto quant funds—are still maintaining a “slightly reduced” cautious stance on the two leading coins.

Ethereum Upgrades Dilemma: Performance Improved, But What About Price?
The market generally expects Ethereum’s upcoming network upgrade this year to reverse Ethereum’s relative weakness, but JPMorgan’s analysts are highly skeptical.
The report notes that over the past three years, Ethereum’s various technical upgrades have not driven on-chain activity growth. Instead, these upgrades mainly focused on reducing Layer 2 transaction costs, which, while beneficial for ecosystem expansion, directly led to a sharp decrease in transaction fees on the mainnet. This significantly weakened Ethereum’s “burn mechanism,” and with less burning, the net supply of ETH increased, exerting downward pressure on the price.
Although the upcoming “Glamsterdam” and “Hegota” upgrades are expected to further improve Ethereum’s scalability by increasing throughput and lowering base-layer transaction costs, analysts remain doubtful: can these upgrades truly generate enough new demand?
The key observation moving forward is whether these upgrades can successfully boost network activity or at least stimulate enough demand growth to offset the token supply expansion caused by the weakened burn mechanism.

The Dilemma of Competing Coins: Lack of Liquidity and Trust Crisis
The situation for other competing coins is even more challenging. JPMorgan analysts believe that since 2023, competing coins have been mired in liquidity shortages, insufficient market depth, and stagnant DeFi growth. Coupled with frequent hacker incidents and security vulnerabilities in the crypto space, investor confidence has been severely damaged, leading to low willingness for new capital to enter the market.
JPMorgan concluded in the report: “Various negative factors have seriously eroded market confidence in the competing coin ecosystem, and outside capital remains hesitant to enter and deploy.”