JPMorgan, one of the largest investment banks in the world, has expressed caution about the cryptocurrency markets heading into 2024. However, the bank expects Ethereum’s native token, ether, to outperform bitcoin and other cryptocurrencies. This optimism is based on an upcoming upgrade to the Ethereum blockchain that will make it more scalable.
The upgrade, known as EIP-4844 or protodanksharding, will introduce a new transaction type called the “blob-carrying transaction.” This enhancement is expected to improve transaction speed and benefit Layer 2 networks such as Arbitrum and Optimism by increasing network throughput and reducing transaction fees.
JPMorgan analysts believe that the factors expected to be bullish for bitcoin in 2024, such as the potential approval of spot bitcoin ETFs and the upcoming bitcoin halving event, are already priced into the cryptocurrency’s current value. They note that the ratio of bitcoin’s market price to production cost decreased after the 2020 halving and expect a similar response in 2024.
It is important to note that while JPMorgan is optimistic about ether’s performance, the bank maintains a generally cautious stance on the overall crypto market for the upcoming year. The analysts believe that the recent rally in the crypto market may be overdone and there is a high chance of a “buy-the-rumor/sell-the-fact” effect once the SEC approves spot bitcoin ETFs.
JPMorgan Cautious about Crypto Market
JPMorgan also highlights that excessive optimism among crypto investors has pushed bitcoin into overbought levels. It suggests that the DeFi sector has not been able to encroach into the traditional financial system, which is necessary for the crypto ecosystem to transition to real-world applications. VC funding in the crypto space has seen some reinvigoration but appears to be tentative.
While the bank remains cautious about the overall crypto market, it believes that the upgrade will allow Ethereum to re-assert itself and recapture market share within the crypto ecosystem. However, investors should be mindful of the potential buy-the-rumor/sell-the-fact effect and the high level of optimism that has pushed bitcoin into overbought territory.