Critical Ethereum Report from JPMorgan: Can ETH Recover?

JPMorgan analysts stated that Ethereum’s (ETH) recent upgrades have had a positive impact on price and market capitalization, but have not significantly increased on-chain activity.

In a report prepared under the leadership of JPMorgan's General Manager Nikolaos Panigirtzoglou, it was stated that the Pectra upgrade, which took place earlier this month, has made Ethereum more attractive to institutional investors. Pectra brings together several Ethereum Improvement Proposals that offer enhancements such as increasing staking efficiency, boosting rewards, and faster deposit/withdrawal transactions.

The report stated that Ethereum's adoption of security token standards such as ERC-3643 and ERC-1400 is part of its strategy to increase institutional interest. These standards include regulatory compliance features such as customer identification (KYC) and anti-money laundering (AML) controls, thus making Ethereum more compatible with traditional financial infrastructure. For example, the support of institutions like DTCC (Depository Trust and Clearing Corporation), which plays a key role in the U.S. securities settlement system, strengthens this strategy.

Analysts noted that Ethereum's institutional orientation bears similarities to the increased interest of institutional and corporate investors in Bitcoin. It was stated that with this orientation, Ethereum distinguishes itself from competing platforms that are prominent in memecoin activities, which are predominantly used by individual users.

The CME futures positions for Ethereum also support this institutional transformation. According to JPMorgan's institutional flow indicator, the open positions and price movements in CME ETH futures indicate an increase in long positions from institutional investors. However, the limited inflows into spot ETH ETFs, especially compared to the intense demand for spot Bitcoin ETFs following Donald Trump's election victory, reveal that individual investor interest is weak.

However, despite all these institutional steps, it was noted that there has not been a significant increase in the fundamental metrics of Ethereum on-chain. While there has not been a noticeable rise in the daily transaction count and the number of active addresses, although the total value locked has increased in terms of (TVL) ETH, it was stated that the growth in dollar terms remained limited.

Finally, JPMorgan analysts noted that with the widespread adoption of Layer 2 solutions, ETH transaction fees have decreased, and since the Dencun upgrade, an increase in the circulating supply of ETH has been observed, which, combined with low transaction activity, poses a risk of Ethereum becoming inflationary again.

*This is not investment advice.

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