JPMorgan analysts describe biggest challenges for bitcoin and ethereum

US banking giant JPMorgan threw cold water on the two largest cryptocurrencies in a note sent out to clients this week. 

Bitcoin’s volatility will be the biggest factor in obstructing widespread institutional adoption, the bank said. Ethereum’s challenges include its waning dominance in the decentralized finance (DeFi) space as alternative blockchains like Solana gain traction. 

The JPMorgan analysts compared the volatilities of bitcoin and gold, noting that bitcoin must reach $150,000 in value to equate to comparable gold investment holdings. “Needless to say, such convergence or equalization of volatilities or allocations is unlikely in the foreseeable future,” researchers led by Nikolaos Panigirtzoglou wrote. 

The bank noted in April that a decline in bitcoin's volatility could help its adoption among institutions.

Still, bitcoin remains five times more volatile than gold and experiences frequent boom-and-bust cycles, which can scare off institutional investors. 

Ethereum’s challenges include its waning dominance in the decentralized finance (DeFi) space as alternative blockchains like Solana gain traction.

However, Ethereum has lost its dominance in the DeFi space in the past year as alternative blockchains take up more space. 

“What has been striking during this month’s correction is that ethereum has not managed to recapture market cap share versus its main competitors as its price declined by a similar magnitude to smaller altcoins,” the researchers wrote.

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MK Manoylov is a reporter for The Block covering NFTs, blockchain-based gaming and cybercrime. MK holds a graduate degree from New York University's Science, Health, and Environmental Reporting Program (SHERP).