JPMorgan Analysts Highlight Ethereum’s Competitive Threats

According to analysts at JPMorgan, the second-largest cryptocurrency by market capitalization will continue to face “intense competition” from rival blockchain projects such as Solana. This was reported by The Block.

The experts noted that amid the U.S. elections, the market generally grew, but the cryptocurrency ETH lagged behind Bitcoin and many altcoins. Ethereum’s share of the total market capitalization fell to its lowest level in four years, indicating increasing pressure from competitors, the experts observed.

Why is Ethereum Lagging?

Analysts cite two main reasons for the lackluster performance: increased competition from new blockchains like Solana and second-layer (L2) solutions with lower fees and high performance.

Even after the Dencun update and scalability improvements through a new type of transaction for large binary data arrays (BLOB), activity is increasingly shifting to L2, weakening the base layer, analysts claim.

The intensifying competition has also prompted leading decentralized applications to transition to specialized blockchains of their own design to enhance performance and reduce costs. dYdX and Hyperliquid have already made this move, and experts consider the upcoming transition of Uniswap to Unichain particularly significant. The departure of a leading DEX from Ethereum will reduce fee revenues and increase the risk of network inflation, as fewer transactions will decrease the intensity of token burning.

Despite these challenges, the ecosystem of the second-largest cryptocurrency still leads in the field of stablecoins, DeFi, and tokenization, although its ability to maintain dominance remains in question, analysts note.

To encourage institutional adoption, Ethereum co-founder Vitalik Buterin and the Ethereum Foundation recently invested in the startup Etherealize, founded by former Wall Street trader Vivek Raman. The firm focuses on integrating and promoting Ethereum among financial institutions, highlighting use cases such as tokenization.

Buterin reaffirmed the commitment to scaling Ethereum through L2 solutions.