According to JP Morgan analysts, Bitcoin would struggle to gain institutional acceptance because of its volatility, whilst Ethereum will face more competition from competing blockchains.
Analysts at the New York City-based bank stated in a note to investors that the two largest cryptocurrencies by market cap face “major problems” in the future. However, the recent price drop in the cryptocurrency market “seems less like capitulation relative to last May,” when values dropped by billions in a week, according to the paper.
“We believe the main issue for Bitcoin in the future will be its volatility, as well as the boom and bust cycles that stymie institutional adoption,” — the note stated
It went on to say that Bitcoin, which is down 44% from its all-time high of $69,044 and is currently trading at $38,449, was five times more volatile than gold. Many cryptocurrency investors argue that Bitcoin acts as a type of “digital gold,” meaning that it serves as a hedge against inflation like precious metal.
In the field of Decentralized finance (DeFi) and Non-Fungible Tokens(NFTs), Ethereum competitors such as Solana, Terra, Binance Smart Chain, and others are gaining pace, according to the analysts.
DeFi refers to apps that use blockchain networks to automate what banks do. These apps are typically built on Ethereum’s network, but due to its popularity, it has become expensive and slow. Other blockchains have emerged to compete with Ethereum, and they are performing well, according to JP Morgan analysts.
“What has been striking during this month’s correction is that Ethereum has not managed to re-capture market cap share vs. its main competitors as its price declined by a similar magnitude to smaller altcoins,” the note said.
NFTs are Ethereum-based digital assets that may represent everything from art to video snippets to music. Other networks, such as Solana, have just entered the market, according to the analysts.
Because Solana’s network is less expensive and speedier than Ethereum’s, it has a large following. Collectors of NFTs are increasingly interested in using it to trade NFTs. However, Solana has its own set of issues, with network congestion and slowdowns occurring frequently. The network was offline for 17 hours in September last year. However, the price of SOL, Solana’s native cryptocurrency, has remained stable; at just under $100, it is the seventh-largest cryptocurrency by market capitalization.