Ethereum upgrades may not be enough to lift Ether, JPMorgan warns

Ether has continued to lag behind Bitcoin during the latest crypto market recovery, with analysts at JPMorgan saying weaker network activity and fading confidence across the altcoin market have kept institutional demand tilted toward Bitcoin.

According to a report from JPMorgan led by managing director Nikolaos Panigirtzoglou, Bitcoin has recovered much faster than Ethereum following the recent market turbulence linked to the Iran conflict. The bank said institutional investors have rebuilt exposure to Bitcoin across both spot exchange-traded funds and CME futures markets at a pace not seen with Ether.

Spot Bitcoin ETFs have already regained nearly two-thirds of the outflows recorded during the conflict-driven selloff, JPMorgan said. By comparison, spot Ether ETFs have recovered only around one-third of their earlier withdrawals, indicating weaker investor appetite for Ethereum despite the market rebound.

Data from CME futures positioning painted a similar picture, the analysts noted. Institutional traders have almost fully restored their previous Bitcoin exposure, while Ether positioning on CME remains well below earlier levels.

At the same time, JPMorgan said momentum-driven investors, including commodity trading advisors and crypto quant funds, still appear slightly underweight on both Bitcoin and Ether after the deleveraging event seen last October.

Attention has also turned toward whether Ethereum’s upcoming network upgrades can revive activity on the blockchain and improve Ether’s standing against Bitcoin.

JPMorgan said Ethereum’s major upgrades over the last three years have not translated into stronger network usage. Instead, the changes largely reduced transaction costs on Layer 2 networks, cutting fee revenue generated on Ethereum’s main chain.

Lower fees have also weakened Ethereum’s token burn mechanism, the analysts said, contributing to faster net supply growth and reducing one of the key sources of long term price support for Ether.

Scheduled upgrades known as Glamsterdam and Hegota are expected to improve scalability by increasing throughput and reducing costs on Ethereum’s base layer. JPMorgan, however, questioned whether cheaper transactions alone would be enough to create sustained demand growth across the network.

The analysts said it remains unclear whether the upgrades can generate enough new activity to offset the continued decline in token burns and the resulting increase in Ether supply.

Beyond Ethereum, JPMorgan said altcoins have struggled against Bitcoin since 2023 as liquidity conditions weakened across the crypto sector. The bank pointed to thinner market depth, slowing decentralized finance activity, and repeated security breaches as key reasons investors have become more cautious toward the wider altcoin market.

Repeated hacks and operational failures across crypto platforms have also discouraged fresh capital from entering altcoins, according to the report, leaving Bitcoin in a stronger position as institutional investors continue favoring more established digital assets.