According to a report from The Block, analysts at JPMorgan highlighted several reasons for the underperformance of Ethereum and suggested that the blockchain may continue to face “intense competition” from other competitors in the future.
Market share at multi-year low
Led by Nikolaos Panigirtzoglou, the JPMorgan analyst team stated in their report that while the overall cryptocurrency market saw a surge during the US election, Ethereum (ETH) performed poorly, falling behind Bitcoin (BTC) and other altcoins.
The analysts pointed out that Ethereum’s market share in the entire cryptocurrency market has now dropped to its lowest point in four years, highlighting increasing pressure from competitors.
Source: TradingView
Main reasons for underperformance
The analysts identified two main reasons for Ethereum’s underperformance. First, the intensifying competition from blockchains such as Solana and Layer 2, which offer lower network transaction fees and higher scalability. Second, compared to Bitcoin’s positioning as a store of value, Ethereum lacks a strong narrative.
The analysts stated that even though Ethereum has introduced the Dencun upgrade to lower costs and improve scalability, network activity is gradually migrating from the Ethereum mainnet to Layer 2, reducing the mainnet’s influence.
Furthermore, the increasingly fierce competition has driven major decentralized applications (DApps) to build their own specific application blockchains for better performance and lower costs. Uniswap, dYdX, and Hyperliquid have already made such moves, with Uniswap’s upcoming Unichain being particularly significant.
The analysts stated that Uniswap’s departure, as one of Ethereum’s largest gas-consuming applications, could reduce Ethereum’s transaction fee revenue and increase its supply inflation risk, as a decrease in transactions would lead to a decrease in token burn.
The analysts noted that despite these challenges, Ethereum still holds a leading position in stablecoins, DeFi, and tokenization. However, whether it can maintain this advantage remains to be seen. The report concluded that while tokenization may drive institutional demand for Ethereum, “competition from other networks may remain intense in the foreseeable future.”
Related articles: “Ethereum Supply Rises to Pre-Merge Upgrade Levels, Analysts Attribute it to Dencun Upgrade” and “Under Public Pressure, Vitalik Calls for Support to Layer 2: Come Back and Support ETH.”