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US investment bank JPMorgan stated that for Ethereum and the altcoin market to reverse their long-standing weak performance against Bitcoin, strong growth in network usage, decentralized finance (DeFi) adoption, and real-world use cases is needed.
The bank’s report, published last week, stated that cryptocurrency markets have been under pressure for the past six months due to rising interest rates, persistent inflationary pressures, and weak risk appetite. During this period, both Bitcoin and Ethereum experienced sharp pullbacks, while massive outflows from spot ETFs and reduced leverage in the market further increased selling pressure.
JPMorgan analysts said that despite a recovery in the crypto market following the Iran conflict, Ethereum and other altcoins continue to lag behind Bitcoin. The team of analysts, led by Nikolaos Panigirtzoglou, stated that one of the clearest indicators of this divergence is ETF flows. According to the report, spot Bitcoin ETFs have recovered approximately two-thirds of their previous outflows, while spot $ETH ETFs have only recovered about one-third.
The report also noted that momentum investors, such as CTAs and crypto-focused quantitative funds, are still slightly underpositioned in both Bitcoin and Ethereum. This indicates that speculative investors have not yet formed strong long positions.
On the other hand, JPMorgan noted that cryptocurrency prices have stabilized somewhat following the start of the conflict with Iran. Investors are reportedly turning to cryptocurrencies due to the 24/7 availability of markets and signs of renewed institutional demand. According to the bank, while Bitcoin and $ETH have occasionally outperformed stocks and other risky assets, market volatility remains high.
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Analysts stated that the Glamsterdam and Hegota upgrades, planned for rollout on the Ethereum network in 2026, aim to increase scalability and reduce transaction costs. However, JPMorgan added that previous Ethereum updates have failed to sustainably increase on-chain activity.
The report states that past upgrades have primarily reduced Layer-2 network costs and transaction fees, which in turn weakened Ethereum’s token burning mechanism and increased the net supply. Analysts noted that this has led to a decrease in the supportive effect on the $ETH price.
JPMorgan also cited tight liquidity conditions, low market depth, limited DeFi growth, and repeated security breaches as reasons for altcoins’ weak performance against Bitcoin since 2023. According to the bank, large-scale attacks on DeFi protocols and trading platforms erode investor confidence, accelerate capital outflows from the market, and slow institutional adoption, particularly in altcoin ecosystems.
*This is not investment advice.
