JPMorgan expects Ethereum to surpass Bitcoin and other cryptocurrencies in 2024, but the bank remains generally “cautious” about the cryptocurrency market next year.
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JPMorgan analysts led by Nikolaos Panigirtzoglou will look to reassert themselves on Wednesday and recapture market share within the cryptocurrency ecosystem. “The main catalyst is the EIP-4844 upgrade, or Protodanksharding, which is expected to occur during the first period. We believe this upgrade will be a further step forward in improving Ethereum network activity, helping Ethereum perform better. “I believe it will help.”
Protodanksharding is the first step toward a full implementation of Danksharding, a more efficient form of sharding on Ethereum. Unlike the originally planned sharding technology, Danksharding avoids the complex process of splitting Ethereum into multiple shard chains. Instead, we introduce data blobs, which are temporary data packets attached to blocks. These packets can hold more data than a block, but are not permanently stored or accessed by the Ethereum virtual machine.
JPMorgan analysts reiterated that the upgrade is particularly useful for layer 2 networks like Arbitrum and Optimism as it provides additional temporary data space to increase network throughput and reduce transaction fees for Ethereum’s layer 2 networks. Essentially, data blobs improve the efficiency of the layer 2 network without changing the Ethereum block size.
bitcoin halving price
JP Morgan analysts said factors that are optimistic about Bitcoin next year, including the possibility of spot ETF approval and the upcoming halving, have already been priced in.
Analysts noted that Bitcoin’s market price to production cost ratio has decreased since the 2020 halving, and a similar move would make sense after the 2024 halving.
“And given that the ratio of Bitcoin price to production costs is currently around x2.0, this could mean that the 2024 Bitcoin halving event is mostly in the price,” the analysts concluded.
DeFi’s ‘biggest disappointment’
The “biggest disappointment” of decentralized finance, according to JPMorgan analysts, is the cryptocurrency ecosystem’s inability to breach the traditional financial system needed to transition from cryptocurrency-based to real-world applications.
“The largest application of blockchain to traditional finance – overnight repo transactions via smart contracts on blockchain platforms hosted by companies such as Broadridge and JPMorgan – occurs outside of public blockchains,” the analysts said. He added that tokenization is evolving “rather slowly” due to fragmentation, lack of cooperation and interoperability between platforms, delays in the introduction of central bank digital currencies by the Federal Reserve and ECB, and regulations.
Cryptocurrency VC funding outlook
Venture capital funding in the cryptocurrency space improved somewhat in the fourth quarter of this year compared to the rest of the year, but this improvement appears to be “somewhat tentative” to JPMorgan analysts.
“However, if these improvements continue into the first quarter of 2024, it would mark a significant development that signals the end of the cryptocurrency winter,” the analysts said.
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