The recent recovery in decentralized finance and non-fungible tokens is positive, but not yet strong or conclusive, according to JPMorgan.
“We do not doubt that the recent resurgence in DeFi/NFT activity is a positive sign, but we believe it is too early to get excited about it,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report Thursday. “These are only tentative signs of revival,” they said.
After nearly two years of slowdown, NFT sales and total DeFi value have increased in recent months. According to analysts, the recovery has created “some optimism that the worst may be behind us in terms of the medium-term trajectory of DeFi/NFT activity,” but it is premature to start feeling optimistic.
Some recovery in DeFi is “natural,” given the increase in cryptocurrency trading activity, some of which is transferred through decentralized exchanges. Liquid Stake, led by Lido, has been helping improve DeFi since early 2023, well before the hype over the approval of a spot Bitcoin ETF emerged, analysts said.
Meanwhile, the price of Ether was underperforming compared to other cryptocurrencies. According to the analyst, this means that measuring the total value locked in Ether terms “will mechanically show some recovery, given that the prices of several smaller cryptocurrencies have risen more than Ether in recent months.” .
DeFi/NFT resurgence leaves Ethereum behind.
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Well-known issues, including high fees and low transaction speeds, have hindered the growth of blockchains despite the recent DeFi/NFT resurgence, according to JPMorgan analysts. ““Ethereum does not appear to have benefited much from the recent resurgence in DeFi/NFT activity,” the analysts said.
The emergence of new blockchains, DeFi protocols and NFT platforms such as Aptos, Sui, Sei, Celestia and Blur is “encouraging,” according to analysts. They added that upcoming Ethereum upgrades could address the blockchain’s scalability issues to maintain its dominance, but the timing and effectiveness of these upgrades remain uncertain.
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