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JPMorgan Says ETH will Outperform Bitcoin: Will The Flippening Ever Happen?

Last Updated December 15, 2023 11:00 AM
Teuta Franjkovic
Last Updated December 15, 2023 11:00 AM

Key Takeaways

  • Ethereum could do surpass Bitcoin in performance next year due to the upcoming Protodanksharding upgrade.
  • The JPM report says the potential impact of Bitcoin halving on its price is already factored into current valuations.
  • JPMorgan analysts are stating that the approval of spot Bitcoin ETFs may not lead to a significant influx of new capital.

JPMorgan’s crypto outlook  for 2024 is marked by caution, particularly regarding Bitcoin (BTC). The financial institution perceives Bitcoin as being overbought, driven by what they consider “excessive optimism” surrounding the potential approval of a spot Bitcoin ETF.

Its new report suggests Ethereum (ETH), currently the world’s second-largest cryptocurrency, may surpass Bitcoin, the largest, in performance next year.

Protodanksharding To Drive Ethereum’s Growth

The report, authored by JPMorgan analysts including Nikolaos Panigirtzoglo, cites the anticipated Ethereum network upgrade, dubbed “Protodanksharding ,” as a key factor in this potential shift. This upgrade, expected in the first half of 2024, aims to significantly enhance the efficiency of the Ethereum network.

According to the JPMorgan report, Protodanksharding is the primary catalyst for this expected outperformance. Analysts believe that this upgrade will be a significant step in improving the activity on the Ethereum network, thereby boosting its performance relative to Bitcoin.

The report also addresses the upcoming 2024 Bitcoin halving. It notes that current valuations already factor the potential impact on Bitcoin’s price into their predictions.

Despite speculations that the halving event would lead to a substantial price increase for Bitcoin, JPMorgan suggests that this is not a certainty and that Ethereum’s advancements could position it for stronger performance in comparison.

The report said: “Given the current ratio of the Bitcoin price to production cost is around x2.0 at the moment, this would imply that the 2024 Bitcoin halving event is largely in the price.”

Spot Bitcoin ETFs May Not Boost Crypto Markets

The JPMorgan report presents a skeptical view on the potential impact of Bitcoin exchange-traded funds (ETFs).

It says the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC), anticipated in 2024, may not lead to a significant influx of new capital into the crypto markets. This is based on observations from Europe and Canada, where the approval of spot crypto ETFs did not substantially increase investor interest or capital flow into the volatile Bitcoin or Ethereum markets.

Grayscale ETF Woes Loom

JPMorgan analysts believe that the approval of Bitcoin ETFs could redirect investments towards existing Bitcoin-related products. These include Bitcoin mining companies, the Grayscale Bitcoin Trust, or Bitcoin futures ETFs.

This conversion could lead to investors seeking to capitalize on the SEC’s approval. This could result in up to $2.7 billion in losses for the Trust. Such a scenario is expected to exert “severe downward pressure” on Bitcoin’s price.

Adding to the cautious stance on cryptocurrencies, JPMorgan CEO Jamie Dimon expressed his negative view during a Senate banking committee hearing last week. Dimon stated his willingness to “close [crypto] down,” indicating a strong skepticism towards the cryptocurrency market.

Dimon said: “The true use case for it [crypto] is criminals, drug traffickers, money laundering, tax avoidance, I’ve always been opposed to crypto, Bitcoin, et cetera.”

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