The recent technical improvements of Ethereum struggle to convince JPMorgan analysts. Despite promising innovations and a renewed institutional interest, onchain activity remains desperately low. Should investors worry about this stagnation?

Technical improvements struggling to convince users

The JPMorgan analyst team, led by Nikolaos Panigirtzoglou, provides a mixed assessment of Ethereum’s recent developments. The Pectra upgrade, deployed this month, was supposed to revolutionize the ecosystem through several major improvement proposals.

These aimed notably at optimizing staking efficiency, increasing rewards, and accelerating deposit and withdrawal processes.

However, the data speaks for itself. Daily transactions show no significant progress. Active addresses also stagnate, revealing user engagement that remains at a standstill.

Even total value locked (TVL), though rising in ETH, progresses timidly when expressed in dollars.

This situation contrasts with crypto market expectations. Developers and investors were counting on a substantial resurgence in activity following these technical improvements. It is clear that technological innovation alone is no longer sufficient to drive adoption.

Analysts highlight a concerning paradox: while Ethereum fees are dropping due to the rise of Layer 2 solutions, the circulating supply of ETH has increased since the Dencun upgrade. This combination could create an inflationary environment problematic amid low transactional activity.

An institutional strategy distancing Ethereum from retail users

JPMorgan identifies a fundamental transformation in Ethereum’s positioning. The blockchain is decisively orienting itself towards the institutional market, adopting standards like ERC-3643 and ERC-1400.

These specialized technical standards facilitate regulatory compliance for tokenized securities, integrating essential KYC and anti-money laundering features for institutions.

This strategic shift is reminiscent of Bitcoin’s evolution, where institutional engagement has greatly strengthened the crypto’s appeal.

Moreover, JPMorgan recently opened its doors to Bitcoin for its clients, even though Jamie Dimon maintains his personal skepticism. The bank also executed its first crypto transaction on a public blockchain, marking a historic step in institutional adoption.

JPMorgan’s institutional flow indicator confirms this trend. Based on the open interest of CME ETH futures contracts, it reveals a strong increase in institutional long positions.

However, Ethereum spot ETFs record limited inflows compared to Bitcoin ETFs, suggesting reduced participation from retail investors.

This differentiation could explain why Ethereum stands apart from competitor platforms focused on individual engagement. While Solana or other blockchains thrive thanks to memecoins and retail activity, Ethereum bets on its compatibility with traditional financial infrastructures.

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In summary, JPMorgan’s conclusions paint a contrasting portrait of Ethereum. While the blockchain succeeds in its transformation towards a credible institutional asset, it struggles to convince its historic user base. This situation raises questions about Ethereum’s ability to maintain its dominant position in the face of ever more aggressive competition. The challenge will be to reconcile technical innovation with massive adoption in a continuously evolving crypto market.