JPMorgan analysts stated that the recent recovery of DeFi and NFT activities, while a positive signal, is still “too early to get excited about.” Furthermore, the analysts believe that the upcoming Ethereum upgrade may address the network’s scalability issues, maintaining its dominant position, but the timing and effectiveness of these upgrades remain uncertain.
Excitement “too early” for recent DeFi and NFT recovery
According to The Block, JPMorgan believes that the recent resurgence of decentralized finance (DeFi) and non-fungible tokens (NFTs) is positive, but not strong or definitive enough.
Led by Nikolaos Panigirtzoglou, JPMorgan analysts wrote in a report on Thursday (30th):
The analysts stated that these are “just temporary signs of recovery.”
After experiencing a slowdown in the past two years, both NFT sales and DeFi’s Total Value Locked (TVL) have seen growth in recent months. The analysts believe that this recovery has led to “some optimism that the worst times in terms of the mid-term trajectory of DeFi/NFT activity may have passed,” but it is still too early to be optimistic.
This is due to the increase in cryptocurrency trading activity, with part of DeFi’s recovery being “natural,” some of which is channeled through decentralized exchanges. JPMorgan analysts stated that liquidity staking led by Lido has been helping DeFi improve since early 2023, even before the hype surrounding the approval of a Bitcoin spot ETF.
According to the analysts, the underperformance of Ether (ETH) price compared to other cryptocurrencies means that measuring TVL in terms of Ether “will mechanically show some signs of recovery, as the prices of several smaller cryptocurrencies have outperformed Ether in recent months.”
Ethereum lags behind in DeFi/NFT recovery
JPMorgan analysts stated that despite the recent recovery of DeFi and NFT, Ethereum’s well-known issues have hindered the development of the blockchain, including high fees and low transaction speeds. The analysts stated:
The analysts believe that the emergence of new blockchains, DeFi protocols, and NFT platforms is “encouraging,” such as Aptos, Sui, Sei, Celestia, and Blur. They added that the upcoming Ethereum upgrade may address the blockchain’s scalability issues, maintaining its dominant position, but the timing and effectiveness of these upgrades remain uncertain.
Related reports: “Ethereum developers have confirmed: the mainnet ‘Cancun upgrade’ cannot be implemented this year” and “In addition to the highly anticipated EIP-4844, what other proposals will the Cancun upgrade include?”