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Ethereum Expected to Do Better Than Bitcoin in the Coming Year: JPMorgan

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JPMorgan analysts predict that in 2024, Ethereum (often called Ether) is likely to perform better than Bitcoin and other cryptocurrencies.

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This expectation is based on the upcoming EIP-4844 upgrade for Ethereum scheduled for next year. This upgrade is seen as a key factor contributing to the positive outlook for Ethereum’s performance.

JPMorgan Forecasts Ethereum’s Outperformance in 2024

JPMorgan is optimistic about Ethereum (commonly known as Ether) surpassing Bitcoin and other cryptocurrencies in performance during 2024. Despite the bank’s general caution about the upcoming year’s crypto markets, analysts believe that Ethereum is poised to reclaim its market share within the crypto ecosystem. This positive outlook is primarily attributed to the anticipated EIP-4844 upgrade, also known as Protodanksharding, scheduled for the first half of 2024. The upgrade is seen as a crucial step in enhancing Ethereum’s network activity and potentially leading to improved overall performance.

Protodanksharding marks the initial phase toward implementing Danksharding, a more efficient sharding method for Ethereum. In contrast to the original plan, Danksharding simplifies the process by avoiding the complex division of Ethereum into multiple shard chains. Instead, it introduces “data blobs” – temporary data packets attached to blocks capable of holding more information than traditional blocks. Importantly, these data blobs are not permanently stored or accessed by the Ethereum virtual machine.

JPMorgan analysts emphasize the significance of this upgrade, particularly for Layer 2 networks like Arbitrum and Optimism. The introduction of data blobs provides additional temporary data space, enhancing network throughput, and reducing transaction fees for Layer 2 networks on the Ethereum platform. In essence, this innovation makes Layer 2 networks more efficient without necessitating changes to the Ethereum block size.

JPMorgan Analysts Assess Factors Impacting Bitcoin’s Outlook in 2024

JPMorgan analysts are providing insights into the future of Bitcoin, suggesting that certain positive factors anticipated for next year, such as the potential approval of spot ETFs and the upcoming halving, are already factored into the current market conditions.

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According to the analysts, historical data indicates that after the 2020 halving, the ratio of Bitcoin’s market price to production cost decreased. Drawing parallels, they argue that a similar adjustment after the 2024 halving would be a reasonable expectation.

The analysts highlight the current ratio of the bitcoin price to production cost, which stands at approximately x2.0. They conclude that this ratio implies that the market has already factored in the potential impact of the 2024 bitcoin halving event. In other words, the expected effects of the halving are already reflected in the current price of Bitcoin, according to the analysts’ assessment.

JPMorgan Analysts Assess Decentralized Finance Challenges

JPMorgan analysts express their disappointment in the decentralized finance (DeFi) sector, identifying a significant hurdle in its struggle to integrate with the traditional financial system. They argue that this integration is crucial for the crypto ecosystem to evolve from being crypto-native to having real-world applications.

According to the analysts, the primary letdown lies in the failure of blockchain technology to make substantial inroads into traditional finance. They point out that significant applications of blockchain in traditional finance, such as overnight repo transactions facilitated by smart contracts on platforms like Broadridge and JPMorgan, predominantly occur outside public blockchains.

Moreover, the analysts note that tokenization, a process seen as a bridge between traditional and crypto finance, is progressing at a slow pace. They describe it as being in a “largely experimental stage,” hampered by challenges such as fragmentation, a lack of cooperation and interoperability between platforms, delays in the introduction of central bank digital currencies by institutions like the Federal Reserve and the European Central Bank, and a general absence of regulatory frameworks.

In summary, the analysts highlight the persistent barriers preventing the seamless integration of decentralized finance into traditional financial systems and the gradual evolution of tokenization, emphasizing the need for increased collaboration and regulatory clarity in overcoming these challenges.

JPMorgan Analysts Assess Crypto Venture Funding

JPMorgan analysts are evaluating the state of venture capital funding in the crypto space, noting a notable uptick in the fourth quarter of the current year compared to the relatively lackluster performance observed throughout the rest of the year. However, the analysts express caution, describing the improvement as “rather tentative.”

The analysts posit that if this positive trend continues into the first quarter of 2024, it could signify a significant development and, in their opinion, mark the conclusion of what they refer to as the “crypto winter.” The term “crypto winter” typically alludes to periods of downturn or stagnation in the cryptocurrency market.

In summary, the analysts are closely monitoring the trajectory of venture capital funding in the crypto sector, emphasizing the importance of sustained improvement into the next quarter as a potential indicator of broader positive developments within the cryptocurrency space.


Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.

 

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