JPMorgan's In-Depth Analysis: Four Factors That Allow Ethereum to Outperform Bitcoin

Written by: BitpushNews

In the past few weeks, there has been a notable trend in the cryptocurrency market: Ethereum (ETH) has significantly outperformed Bitcoin (BTC).

According to the latest research report released by JPMorgan, Wall Street analysts attribute this phenomenon to four core factors: ETF structural optimization, increased holdings by corporate finance departments, a more relaxed attitude from regulators, and the potential future opening up of staking functions. These factors not only explain Ethereum's recent strength but also suggest that it may have greater upward potential in the future.

1. Market Background: Dual Promotion of Policies and Capital Flow

In July, the U.S. Congress passed the GENIUS Act stablecoin bill, bringing unprecedented institutional benefits to the crypto market. Subsequently, Ethereum spot ETFs attracted a record inflow of $5.4 billion in July alone, nearly matching the inflow of Bitcoin ETFs.

However, in August, there was a slight outflow of funds from Bitcoin ETFs, while Ethereum ETFs continued to show a trend of net inflows. This divergence in fund flows became the direct catalyst for Ethereum's outperformance compared to Bitcoin.

At the same time, the market is awaiting the "Crypto Market Structure Bill" that is set to be voted on in September. Investors generally expect this to be another significant turning point similar to the stablecoin legislation. And under the dual influence of policy and market expectations, Ethereum's position in the capital market is rapidly rising.

II. Analysis of Four Key Factors: Why Ethereum Outperforms Bitcoin?

J.P. Morgan analyst Nikolaos Panigirtzoglou and his team clearly pointed out in their report that Ethereum's strength comes from the following four core drivers:

1. The potential opening of the staking function

Currently, a major feature of the Ethereum ecosystem is the PoS (Proof of Stake) staking mechanism. Users need at least 32 ETH to run a validating node themselves, but for most institutional investors and retail investors, this threshold is relatively high.

If the U.S. Securities and Exchange Commission (SEC) ultimately approves a spot Ethereum ETF that allows staking, fund managers can create additional returns for holders directly without requiring investors to run nodes themselves. This means that a spot ETH ETF is not just a price tracking tool, but will be upgraded to a "yield-generating passive investment product."

This point is fundamentally different from Bitcoin's spot ETF: Bitcoin itself does not have a native yield mechanism, whereas the Ethereum ETF may potentially carry "interest" in the future, which clearly enhances its market appeal.

2. The increase and application of the corporate finance department's holdings

JPMorgan pointed out that about 10 listed companies have incorporated Ethereum into their balance sheets, accounting for approximately 2.3% of the total circulating supply.

What's more noteworthy is that some companies are not just "buying and holding," but are further participating in the ecosystem:

Run validation nodes: directly obtain staking rewards.

Use liquid staking or DeFi strategies: Deposit ETH into derivative protocols to earn additional yields.

This means that Ethereum is gradually evolving from a "speculative asset" to an "enterprise sustainable asset allocation tool." This trend is something that Bitcoin has not yet fully realized.

The involvement of the corporate finance department represents a longer-term and more stable influx of capital, which also enhances the market's valuation anchoring of Ethereum.

3. The regulatory authorities' attitude towards liquid staking tokens has eased.

Previously, the SEC has always had disputes regarding the compliance of liquid staking tokens (LSTs) such as Lido and Rocket Pool, with the market concerned that these tokens may be classified as securities, thereby affecting the participation of large-scale institutions.

However, the latest situation is that the SEC has provided a clarifying opinion at the staff level stating that it "may not consider it as a security." Although it has not yet been formally legislated, this statement has greatly alleviated the concerns of institutions.

Against this backdrop, institutional funds that were originally cautious about compliance may enter the Ethereum staking and related derivative markets more quickly and on a larger scale.

4. Optimization of ETF Redemption Mechanism: Approval for Physical Redemption

The SEC recently approved the physical redemption mechanism for spot Bitcoin and Ethereum ETFs. This means that institutional investors no longer have to go through the cumbersome process of "first selling the ETF for cash" when redeeming ETF shares, but can directly withdraw an equivalent amount of Bitcoin or Ethereum.

This mechanism brings three major benefits:

Improve efficiency: save time and costs.

Enhance liquidity: ETF directly linked to the spot market.

Reduce selling pressure: avoid triggering market sell-offs during large-scale redemptions.

This system is equally beneficial for Bitcoin and Ethereum, but due to Ethereum's relatively low proportion of holdings by enterprises and institutions, it means there is greater potential for future growth and more significant marginal effects.

3. Future Outlook: Has Ethereum's potential surpassed Bitcoin?

JPMorgan noted in its report that while Bitcoin remains the leader as a "store of value" in the crypto market, Ethereum has greater growth potential:

ETF adoption: The funds for ETH ETFs are currently still lower than those for BTC, but with the opening of staking functions, it is expected to attract more long-term capital.

Corporate adoption: Bitcoin has already been held by a large number of enterprises and institutions, while Ethereum is still in its early stages, with significant growth potential in the future.

DeFi and Application Ecosystem: Ethereum is not only a digital asset but also supports decentralized finance (DeFi), NFTs, stablecoins, AI+ on-chain computing, and other applications, thus providing a richer range of use cases.

In other words, Bitcoin is more like "digital gold", while Ethereum is evolving into "the infrastructure of the digital economy".

4. Conclusion

JPMorgan's analysis reveals a key logic: Ethereum's strength is not driven by short-term speculation, but is built on the cumulative effects of four factors: favorable policies, structural optimization, institutional adoption, and potential returns.

With the further improvement of the ETF mechanism, the continuous increase in holdings by corporate finance departments, and the possible future policy confirmation by the SEC, Ethereum is expected to gradually narrow or even surpass Bitcoin's advantage in the future market landscape.

For investors, this trend is not only a signal of capital flow but also likely indicates a turning point for the entire cryptocurrency market from a "single value storage" to a "multidimensional application ecosystem."

In the new chapter of cryptocurrency history, Bitcoin may still be the "digital gold," but Ethereum is quickly growing to become the "heart of the digital economy."