Nearly the entire crypto industry has been suffering through the first week of 2022. With no clear leader setting the pace, there’s much speculation floating around about what the next 12 months holds for the market. What cryptos will soar, and which will fall out of favor? Well, a note from JP Morgan (NYSE:JPM) this morning is throwing into question Ethereum’s (CCC:ETH-USD) market dominance. Will the ETH crypto continue to stack losses through the year, or can it shrug off the current volatility?
Ethereum has become a force to be reckoned with for the entire crypto industry, especially in the last year. The network saw a sizable spike in the active users and capital brought to the platform and its many dapps; it also saw huge benefit by playing host to over 90% of the total non-fungible token (NFT) market. Of course, these good times have also brought massive price spikes, with the ETH crypto seeing an all-time high of nearly $5,000. Unfortunately, the coin is seeing quite a drop today, losing 11% this morning.
The losses aren’t the fault of ETH; the whole industry is seeing a downturn, with various plays dropping 10% or more. Even with its vast market dominance, it’s not immune to bearish moments. But one wonders what would happen if this dominance were to slip. Could the ETH crypto be endangered if it wasn’t so widely used? A note from JP Morgan today thinks it would be, and it believes this dominance will slip.
ETH Crypto Endangered, Says JP Morgan Note
Much of the reason investors are bullish on Ethereum is because of its coming Merge upgrade. The upgrade will see a makeover of the entire network, ridding its proof-of-work consensus, adopting proof-of-stake and introducing sharding to help process data on-chain faster. JP Morgan says that this is simply not enough to save the ETH crypto, though.
In a note this week, an analyst for the bank says that ETH’s upgrade will be too late to help it maintain its market dominance. Of course, crypto is a fast-moving market; it’s imperative for projects to keep up with each other if they want to survive, since users can jump from platform to platform with ease.
With the full rollout of sharding not coming for the next year, users of the Ethereum network will continue to dish out high gas fees to its users. Other projects, meanwhile, offer higher scaling already, with much lower prices to transact. Solana (CCC:SOL-USD), for example, accommodates thousands of transactions per second, and Cardano (CCC:ADA-USD) implemented smart contracts in the fall of 2021 to compete directly with Ethereum.
A year’s time, the note argues, is simply too long for Ethereum to wait for this release. Through the next year, as Ethereum continues to dawdle, more users will flock to other platforms, stealing market share from Ethereum and making the ETH crypto even more susceptible to losses. And while the bank argues that the release of shards would bring some users back to the network, it won’t achieve the same dominance it has now.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.