A new report from JPMorgan analysts led by managing director Nikolaos Panigirtzoglou warns that the prolonged underperformance of ether (ETH) and other altcoins relative to bitcoin (BTC) is unlikely to reverse unless there are meaningful improvements in network activity, decentralized finance (DeFi), and real-world applications. The trend, which began in 2023, has persisted even amid the broader crypto market recovery following the Iran conflict.
ETF flows and institutional positioning highlight the gap. The analysts pointed to spot exchange-traded fund (ETF) flows as a key indicator: bitcoin ETFs have recovered roughly two-thirds of their previous outflows, while ether ETFs have regained only about one-third. Similarly, CME futures positioning shows institutional investors rebuilt bitcoin exposure almost fully to pre-drawdown levels, while ether futures positioning remains below earlier peaks. Momentum-focused traders such as commodity trading advisors and crypto quant funds are still “slightly underweight” both assets after last October’s deleveraging event.
Ethereum upgrades seen as insufficient. The report questions whether upcoming Ethereum upgrades like Glamsterdam and Hegota can change the dynamic. Over the past three years, Ethereum’s upgrades mainly reduced Layer 2 transaction costs, which weakened the network’s token-burn mechanism, led to higher net supply growth, and provided weaker price support for ETH. “It remains to be seen whether these coming improvements can succeed in boosting network activity or at least drive enough demand growth to offset the continued reduction in Ethereum’s burn mechanism and resulting net supply increase,” the analysts said.
Broader altcoin headwinds. The bank cited weaker liquidity conditions, lower market depth and breadth, limited growth in DeFi activity, and repeated hacks and security breaches across the crypto industry as reasons for altcoins’ struggles. “All these factors have eroded confidence in the broader altcoin ecosystem and discouraged the deployment of fresh capital,” the analysts concluded, reinforcing a structural divergence that favors bitcoin as a macro asset.
