Critical Ethereum Report from JPMorgan: Can ETH Recover?

JPMorgan analysts explained that Ethereum’s (ETH) recent upgrades have had positive effects on its price and market cap but have not meaningfully increased on-chain activity.

The report, led by Nikolaos Panigirtzoglou, managing director of JPMorgan, stated that the Pectra upgrade, which took place earlier this month, made Ethereum more attractive to institutional investors. Pectra brings together several Ethereum Improvement Proposals (EIPs) that offer improvements such as increasing staking efficiency, increasing rewards, and faster deposits/withdrawals.

The report noted that Ethereum’s adoption of security token standards such as ERC-3643 and ERC-1400 is also part of a strategy to increase institutional interest. These standards include regulatory compliance features such as know-your-customer (KYC) and anti-money laundering (AML) checks, making Ethereum more compatible with traditional financial infrastructure. For example, the support of institutions such as the Depository Trust and Clearing Corporation (DTCC), which plays a key role in the US securities clearing system, strengthens this strategy.

Analysts stated that this institutional orientation of Ethereum is similar to the interest of institutional and corporate investors increasing the interest in Bitcoin. It was stated that with this orientation of Ethereum, individual users are concentrated and it differentiates itself from rival platforms that stand out with memecoin activities.

Ethereum’s CME futures positions also support this institutional transformation. According to JPMorgan’s institutional flow indicator, open interest and price action in CME ETH futures indicate that long positions from institutional investors are increasing. However, limited inflows into spot ETH ETFs suggest weak retail investor interest, especially when compared to the strong demand for spot Bitcoin ETFs following Donald Trump’s election victory.

On the other hand, despite all these institutional steps, it was stated that there was no significant increase in Ethereum’s on-chain basic metrics. While there was no significant increase in the number of daily transactions and active addresses, it was stated that although the total value locked (TVL) increased in terms of ETH, the growth in dollar terms remained limited.

Finally, JPMorgan analysts pointed out that ETH transaction fees have decreased with the widespread use of Layer 2 solutions, and that there has also been an increase in the circulating supply of ETH since the Dencun upgrade, and that when combined with low transaction activity, Ethereum risks becoming inflationary again.

*This is not investment advice.

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