JP Morgan explains why Ethereum is now performing better than Bitcoin. Indeed, the financial conglomerate has sent a letter to investors after Ethereum hit an all-time high this week.
«Both BTC and ETH experienced a comparable liquidity shock earlier this month. As a consequence, it triggered a comparable slowdown event of their respective derivatives markets in the days that followed.».
Specifically, according to investment bank JP Morgan, the second most popular cryptocurrency, Ethereum (ETH), is showing better performance than Bitcoin (BTC). Due to its advances in liquidity and the increase in the volume of transactions.
According to the Business Insider report, JP Morgan analysts stated: “To the extent that owning a piece of potential Ethereum activity is more valuable, the theory goes, ETH should outperform Bitcoin in the long run».
Reasons why Ethereum should end up outperforming Bitcoin
In particular, in the report titled ‘Why ETH Outperforms ?,’ JP Morgan suggests that cryptocurrency valuations may be less dependent on demand from leveraged traders than Bitcoin (BTC).
Thus, JP Morgan noted that there is an inherent difference between the two assets. Being BTC the store of value and ETH a technology and the backbone of the entire native crypto economy.
In fact, in the document published by JP Morgan the three strengths are detailed:
1. Greater liquidity
According to JP Morgan, last week, the crypto industry was hit hard by a liquidity shock, which originated in the derivatives market.
As a consequence, everyone was affected, but Bitcoin was affected more than most and much stronger than Ethereum.
This is why ETH’s resistance to these events is considered the number one reason for Ethereum’s ability to resist as Bitcoin fell.
«This liquidity shock originated in the derivatives market, leading to considerable settlements».
2. Lack of dependency
Likewise, the second reason that JP Morgan points out, is the lack of dependence on Ethereum in the derivatives markets to transfer or store risk.
«In a market with a significantly higher cash turnover. It is plausible that the underlying basis for long exposure in Ethereum is less reliant on leverage in the form of futures and swaps than Bitcoin.».
3. Longer underlying demand base
Then the third and final main reason for the discrepancy in BTC and ETH right now. It’s that Ethereum has a more durable underlying demand base.
«The Ethereum network has long been characterized by a higher rate of transactions on the public Blockchain than Bitcoin. Likely due in large part to increased activity on DeFi and other platforms».
By way of closing, do you agree with JP Morgan that Ethereum outperforms Bitcoin? Let me know in the comment box.
I say goodbye with this phrase from Lope de Vega: «What counts is not tomorrow, but today. Today we are here, tomorrow maybe, we will be gone».