According to JPMorgan analysts, ether is expected to outperform bitcoin and other cryptocurrencies in 2024. This prediction is based on the upcoming EIP-4844 upgrade, also known as Protodanksharding, which is set to improve the Ethereum network’s activity. The upgrade introduces data blobs, temporary data packets attached to blocks, which enhance the efficiency of Layer 2 networks without altering the Ethereum block size. These improvements are particularly beneficial for Layer 2 networks like Arbitrum and Optimism, as they increase network throughput and reduce transaction fees.
On the other hand, the analysts believe that factors that are seen as bullish for bitcoin, such as the possible approval of spot ETFs and the upcoming halving, are already priced in. The analysts also mentioned that the current ratio of the bitcoin price to production cost suggests that the 2024 halving event is largely accounted for in the price.
In terms of decentralized finance (DeFi), JPMorgan analysts note that its biggest disappointment lies in its inability to encroach into the traditional financial system. They believe that for the crypto ecosystem to transition from crypto-native to real-world applications, it is crucial for DeFi to make inroads into traditional finance. However, the analysts observe that the most significant applications of blockchain to traditional finance occur outside public blockchains. Tokenization is also progressing slowly, hindered by fragmentation, lack of cooperation and interoperability between platforms, delays in the introduction of central bank digital currencies, and lack of regulations.
Regarding venture capital funding in the crypto space, JPMorgan analysts view the improvement seen in the fourth quarter of this year as tentative. They suggest that if this improvement continues into the first quarter of 2024, it could signal the end of the crypto winter.
In conclusion, JPMorgan remains cautious about the crypto markets in the coming year but expects ether to outperform bitcoin in 2024 due to the anticipated upgrades to the Ethereum network. However, the adoption of DeFi into traditional finance and the progress of tokenization are viewed as slower than expected. The continuation of improved venture capital funding could potentially mark the end of the crypto winter.