JPMorgan Anticipates Ether to Outperform Bitcoin in 2024, Citing Optimistic Upgrade
JPMorgan expresses optimism for Ethereum's performance in 2024, expecting it to outshine bitcoin and other cryptocurrencies. Despite an overall cautious stance on the crypto markets, the bank's analysts, led by Nikolaos Panigirtzoglou, attribute the expected success to the EIP-4844 upgrade, also known as Protodanksharding, slated for the first half of 2024. This upgrade is seen as a significant advancement for the Ethereum network, enhancing activity and boosting its competitive position.
Protodanksharding marks a crucial step toward Danksharding, an efficient sharding model for Ethereum. Unlike the initial plan, Danksharding sidesteps the complexity of splitting Ethereum into multiple shard chains. Instead, it introduces data blobs—temporary data packets attached to blocks—to augment data capacity without permanently storing or accessing it through the Ethereum virtual machine.
JPMorgan underscores the benefits of this upgrade for Layer 2 networks like Arbitrum and Optimism, noting that it provides additional temporary data space, enhancing network throughput and reducing transaction fees without altering Ethereum's block size.
On the bitcoin front, JPMorgan analysts believe that factors considered bullish for bitcoin in the coming year, such as potential spot ETF approvals and the upcoming halving, are already factored into the current market prices. They point to a decreased ratio of bitcoin's market price to production cost after the 2020 halving and anticipate a similar adjustment post the 2024 halving.
Despite the positive outlook for crypto, JPMorgan analysts express disappointment in decentralized finance's (DeFi) limited reach into the traditional financial system, which they consider crucial for the crypto ecosystem's transition to real-world applications. Notably, key blockchain applications in traditional finance occur outside public blockchains.
Additionally, tokenization's progress is described as slow and largely experimental, hampered by fragmentation, lack of cooperation, interoperability challenges between platforms, delays in central bank digital currency introductions, and regulatory gaps. While venture capital funding in the crypto space has shown improvement in Q4 compared to the rest of the year, JPMorgan analysts cautiously view this as a tentative development, signaling a potential end to the "crypto winter" if sustained into Q1 2024.