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JP Morgan: Ethereum Is A Better Investment Than Bitcoin. Is This Correct?

JP Morgan – America’s largest investment bank – said that Ethereum now beats Bitcoin as an investment option. Interestingly, this comes shortly after the bank released a report arguing Ethereum’s overestimation in comparison to BTC. Though it presents plausible arguments, there are also some holes in the banking giant’s logic.

Ethereum Over Bitcoin? JP Morgan’s Argument

JP Morgan’s market strategist Nikolaos Panigirtzoglou offered this analysis in a recent report, according to Markets Insider. As he argued, rising interests could make Bitcoin lose long-term value in the eyes of investors. This comes after the Federal Reserve announced that it would scale back its bond-purchasing program starting this month.

According to JPMorgan’s analysis last month, Bitcoin’s climbing price was largely due to institutional reallocation from gold. Businesses sought relief from rising inflation in response to the covid pandemic and lockdowns. Like Mark Mobius mentioned days ago, the US dollar supply has already risen by 30%.

As such, Bitcoin, or “digital gold,” had a critical role to play, and was even beginning to substitute the monetary good. However, Panigirtzoglou concluded that the Fed’s recent news could make Bitcoin lose most of its value proposition.

“The rise in bond yields and the eventual normalization of monetary policy is putting downward pressure on bitcoin as a form of digital gold, the same way higher real yields have been putting downward pressure on traditional gold,” Panigirtzoglou wrote.

By contrast, he believes Ethereum will retain more of its value because it has more use-cases than Bitcoin right now. As things stand, Ethereum is the king of decentralized finance, and also effectively hosts NFT and Stablecoin trading. Furthermore, the analyst sees Ethereum’s upcoming proof-of-stake transition as pivotal, due to growing environmental concerns when investing.

Corrections To This Argument

There are a few caveats worth noting in the investment bank’s valuation. Firstly, the Fed has promised to slightly slow their $120 billion/ month bond purchasing program by $15 billion per month. It also said it would change the pace of the taper” as needed.

Secondly, Ethereum’s additional features relevant to Bitcoin are likely just a short-term phenomenon. For example, SOVRYN is a DeFi protocol built on top of Bitcoin, and is already scaling its features at a rapid rate. These developments are not impossible with Bitcoin, but are simply taking longer to build out.

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Finally, we acknowledge the overstatements regarding Bitcoin’s environmental damage due to proof-of-work mechanism. Also, the network hash power has become significantly greener since China ejected the miners. Since then, hash power and mining revenues have been gathering in more environmentally friendly western countries.

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