Ethereum will outperform bitcoin next year and recapture market share in crypto, JPMorgan says

• JPMorgan analysts expect ethereum to outperform bitcoin next year.
• A proposed network upgrade could serve as a catalyst for market share gains, they added.

A potential network upgrade for ethereum could be bullish for the crypto next year, according to JPMorgan analysts.

In their crypto outlook for 2024, they see ethereum beating bitcoin and gaining market share.

"While we are cautious on overall crypto markets into 2024, we are looking for ethereum to outperform bitcoin and other cryptocurrencies next year helped by the forthcoming EIP-4844 upgrade or Protodanksharding," they wrote on Wednesday.

"Protodanksharding" is essentially a proposal to reduce transaction costs and boost the number of transactions per second.

Those changes could serve as a catalyst for ethereum to recoup its share of the crypto market by improving network activity.

"We believe that next year ethereum will re-assert itself and recapture market share within the crypto ecosystem," analysts wrote.

Etherum has ridden the wave of the crypto comeback this year, up almost 90% since January. The currency now sits at $2,270. But its gains have lagged behind bitcoin, which has rocketed by around 154%.

The rally has largely been buttressed by optimism that a spot bitcoin ETF will get regulatory approval soon. But JPMorgan analysts are more skeptical about the bullish bets on bitcoin.

Crypto optimists believe a spot ETF approval would improve liquidity and lower the barrier of entry for more investors to invest in bitcoin without owning the currency. JPMorgan, however, thinks it's not so much new capital that would flow into the crypto as much as it is re-shuffled money from other crypto assets.

Also fueling the hype in bitcoin is the halving event scheduled for April next year, which tends to reduce the supply of the currency and lift prices. But the more bearish take by JPMorgan analysts is that the quadrennial event has been "well factored" into the current price, and the currency won't rally post-halving.

"We instead look for around 20% drop in the hash rate post halving as miners in higher cost locations or with less efficient hardware would be forced to exit the market," they wrote. "This scenario would be more consistent with around $35k bitcoin price post halving."