Foreign media reports that J.P. Morgan’s latest view holds that for Ethereum and the broader altcoin market to close the gap with Bitcoin, the key lies not merely in technological upgrades, but in whether on-chain activity, DeFi usage, and real-world demand rebound. The bank assesses that, until these metrics show clear improvement, Bitcoin will remain the preferred allocation for institutional capital.
ETF fund recovery speeds diverge
JPMorgan stated that after market pullbacks triggered by the Iran conflict, Bitcoin spot ETFs have recovered about two-thirds of the outflows, while Ethereum spot ETFs have only regained about one-third. The bank also noted that CME Bitcoin futures positions have nearly returned to pre-drop levels, while Ethereum’s recovery has lagged behind.
In its view, this gap is not a short-term fluctuation but a persistent relative underperformance since 2023. Even though both asset classes have now recovered from their prior lows, institutional capital preferences have not shown a clear reversal.
Upgrading does not necessarily lead to increased demand.
JPMorgan noted that Ethereum's upcoming Glamsterdam and Hegota upgrades aim to enhance scalability and reduce transaction costs. However, the bank believes that past upgrade experiences show that technical improvements alone do not automatically translate into stronger on-chain demand.
The line noted that while previous upgrades reduced Layer 2 costs and mainnet transaction fees, they also weakened the ETH burn mechanism, putting downward pressure on net supply. Without sufficient new demand, a cheaper and more efficient network alone cannot alter ETH's relative weakness compared to Bitcoin.
The altcoin market remains weighed down by low liquidity.
Apart from Ethereum, J.P. Morgan believes that most altcoins have consistently underperformed Bitcoin since 2023 due to factors including tighter liquidity, insufficient market depth, slowing DeFi growth, and multiple security incidents that have undermined market confidence.
The row stated that these factors collectively dampened the willingness of new capital to enter the altcoin ecosystem and led institutions to view Bitcoin as a clearer macro trading instrument within the crypto asset class. Momentum investors, including commodity trading advisors and crypto quantitative funds, maintained relatively conservative positions in both Bitcoin and Ethereum following the deleveraging event in October last year.
JPMorgan also noted that regulatory developments could be among the few factors capable of altering the current landscape. The bank specifically highlighted the U.S. CLARITY Act, suggesting that clearer delineation of digital asset regulatory responsibilities could increase participation from venture capital, mergers and acquisitions, IPOs, and traditional financial institutions. However, prior to such developments, institutional capital is likely to continue prioritizing Bitcoin.