Ethereum’s Potential to Outperform Bitcoin in 2022
Analysts from JPMorgan, the world’s largest bank, predict that Ethereum (ETH) will surpass Bitcoin (BTC) next year. They attribute this expectation to Ethereum’s upcoming network upgrade called “Protodanksharding” (EIP-4844), which is expected to boost network activity.
What is Protodanksharding?
Protodanksharding is a preliminary step towards implementing “danksharding,” a scaling technique that will enhance Ethereum’s layer 2 networks, allowing for increased transaction throughput and lower fees. The JPMorgan analysts believe that this upgrade will help Ethereum outperform Bitcoin and other cryptocurrencies in 2022.
JPMorgan’s Perspective on Ethereum
JPMorgan has previously expressed disappointment with Ethereum’s network activity after its Shanghai upgrade in April. Despite the resurgence of decentralized finance (DeFi) and non-fungible tokens (NFTs) on other networks, Ethereum has not experienced a significant revival beyond staking. However, the upcoming upgrade is expected to change this trend.
Bitcoin as an Alternative Network
Bitcoin has been gaining traction as a platform for NFTs and tokenization, thanks to its Ordinals protocol. During peak activity, Bitcoin’s transaction fees have even rivaled those of Ethereum. However, JPMorgan believes that Ethereum’s network improvements will ultimately position it as a superior choice compared to Bitcoin.
The Outlook for Bitcoin
While Bitcoin has performed well this year with a 158% increase in price, JPMorgan does not expect this outperformance to last. The analysts argue that excessive optimism surrounding the approval of spot Bitcoin ETFs by the SEC has led to overbought levels. They believe that any influx of institutional capital will simply shift from existing Bitcoin investment vehicles.
Bitcoin Halving and Pricing
JPMorgan suggests that the Bitcoin halving event in April is already priced in based on the current cost of BTC production for miners. They state that the current price-to-production cost ratio indicates that the 2024 halving event is largely factored into the price of Bitcoin.
Hot Take: Ethereum’s Upcoming Upgrade Positions It for Success
With Ethereum’s Protodanksharding upgrade on the horizon, JPMorgan analysts predict that Ethereum will outperform Bitcoin and other cryptocurrencies in 2022. This network improvement is expected to boost activity, transaction throughput, and lower fees, positioning Ethereum as a superior choice. While Bitcoin has experienced significant growth this year, JPMorgan believes that excessive optimism regarding spot Bitcoin ETF approvals and the pricing of future events may limit its continued outperformance. Overall, Ethereum’s technical upgrades make it a promising investment option for the coming year.
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