JP Morgan: Bitcoin, Ethereum Continue to Face 'Significant Challenges'

JP Morgan analysts have said that Bitcoin will struggle to get institutional adoption because of its volatility while Ethereum will face more competition from rival blockchains. 

In a note for investors, analysts at the New York City-based bank said that they saw "significant challenges" going forward for the two biggest cryptocurrencies by market cap. 

But the note also said that the cryptocurrency market’s current price dip looks "less like capitulation relative to last May," when prices shed billions in one week. 

"We think the biggest challenge for Bitcoin going forward is its volatility and the boom and bust cycles that hinder further institutional adoption," the note read.

It added that Bitcoin, which is down 44% from its November all-time high of $69,044, trading for $38,449 right now, was also five times more volatile than gold. Many cryptocurrency investors claim that Bitcoin works as a form of "digital gold," meaning that it serves as a hedge against inflation like the precious metal.

The analysts noted that Ethereum competitors—Solana, Terra, Binance Smart Chain, and others—were gaining traction in the world of decentralized finance (DeFi) and non-fungible tokens (NFTs). 

DeFi refers to apps that aim to automate what banks do by using blockchain networks. Such apps are usually built on Ethereum’s network but because so many people use it, it has become costly and slow. Other blockchains have popped up to compete with Ethereum and, as the JP Morgan analysts noted, they are doing well. 

"What has been striking during this month’s correction is that Ethereum has not managed to re-capture market cap share vs. its main competitors as its price declined by a similar magnitude to smaller altcoins," the note said. 

NFTs are digital tokens representing anything from art, video clips and music which tend to exist on Ethereum’s network. But recently other networks like Solana have muscled in, the analysts noted. 

Solana's network is popular because it is cheaper and faster than Ethereum's. And NFT collectors are increasingly looking to use it to trade NFTs. Solana, however, has its own share of problems and frequently suffers from network congestion and slowdowns. Last September, the network went down for a full 17 hours. The price of SOL, Solana’s native cryptocurrency, remains resilient, however; at just under $100, it remains the seventh-largest crypto asset by market cap.