JPMorgan: Ethereum to Surpass Bitcoin’s Market Share in 2024

JPMorgan, often considered a financial oracle, has made several bold predictions that caused a stir in the crypto world. Contrary to popular belief that Bitcoin will continue to dominate the market, the banking giant suggests that Ethereum will emerge as the star player in 2024. 

However, despite the seemingly optimistic outlook, the bank maintains an overall cautious stance on the near future of crypto markets.

Here’s the breakdown of what JPMorgan’s prediction means for Ethereum and the crypto industry in general.

Sharding update will strengthen Ethereum

“We believe that next year Ethereum will re-assert itself and recapture market share within the crypto ecosystem,” JPMorgan analysts, led by Nikolaos Panigirtzoglou, said in a note published on Wednesday, December 13, 2023. 

They explained that the EIP-4844 upgrade or Protodanksharding, predicted to happen within the first half of next year, would be responsible for the surge. The JPMorgan researchers described the upgrade as a “bigger step towards improving Ethereum network activity, thus helping Ethereum to outperform.”

Protodanksharding represents a critical step toward the full implementation of Danksharding, a more efficient form of sharding — the database partitioning or categorization process aimed at simplifying data management — for Ethereum. 

Unlike the initially planned sharding technique, Danksharding introduces data blobs or temporary data packets attached to blocks. Data blobs can hold more data than blocks, but they are not permanently stored or accessed by the Ethereum virtual machine. This step avoids the inefficient process of splitting Ethereum into multiple shard chains. 

According to JPMorgan, this upgrade will especially benefit Layer 2 networks like Arbitron (ARB) and Optimism (OP), enhancing their efficiency without altering the Ethereum block size. Data blobs are expected to provide additional temporary data space, improve network throughput, and reduce transaction fees for Layer 2 networks on Ethereum.

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Ether predictions

JPMorgan’s forecast indicated potential bullish movement for Ethereum’s native token, Ether. The prediction aligns with Standard Chartered’s. The Britain-based banking firm previously suggested a potential 400% surge in Ether’s value within a few years, followed by a sustained upward movement toward $35,000. 

Geoff Kendrick, head of crypto research and EM FX West at Standard Chartered, expressed a viewpoint that Ether’s upward trajectory might unfold at a slower pace than Bitcoin. However, despite the expanded timeline, Kendrick believes that Ether will eventually reach a higher price multiple than Bitcoin relative to their current levels. He anticipates the price for Ethereum to multiply by 5.0 times, compared to Bitcoin’s expected 3.5 times. 

JPMorgan analysts also maintain a cautious perspective on Bitcoin in 2024. They believe that factors expected to be bullish for Bitcoin, such as the possible approval of spot ETFs and the upcoming halving, are already priced into its value. 

The analysts highlight the historical pattern of Bitcoin’s market price-to-production cost ratio decreasing after the 2020 halving, suggesting a similar response could be expected after the 2024 halving.

As of now, Bitcoin is trading around the $40,000 mark and is anticipated to reach $50,000 by the end of December. Investors will monitor crypto news closely to gain further insights about the token’s potential trajectory. 

DeFi concerns

Despite these positive indicators for cryptocurrencies such as Ether and Bitcoin, JPMorgan expressed concerns about the decentralized finance (DeFi) sector, noting its struggle to break free from traditional banking.

The industry has accomplished several milestones this year, but analysts noted that DeFi’s inability to align with standard banks remains a significant hurdle for crypto adoption as a whole. Tokenization is challenging to accomplish due to weak regulations, flawed platforms, and difficulties in collaboration.  

JPMorgan acknowledges that 2023 was not particularly exciting for venture capital funding in the crypto space, but the last quarter brought some optimism for investors. The bank cautiously anticipates steady growth in the first quarter of 2024, hoping it may signal the end of the so-called “crypto winter.”