ETH vs BTC: JP Morgan thinks Ethereum will be the king by 2024

Ethereum is poised to reassert itself and outperform other cryptocurrencies in 2024, according to JPMorgan analysts.

The key driver will be Ethereum's much-anticipated EIP-4844 upgrade, called Protodanksharding, scheduled for the first half of next year.

Main points

Ethereum's upcoming EIP-4844 (Protodunksharding) update in 2024 will boost the Ethereum network and help it outperform other cryptocurrencies like Bitcoin. In the year 2024 for Bitcoin as spot ETF approvals and the halving event as JPMorgan's Bitcoin price. Decentralized finance continues to struggle to penetrate traditional finance due to issues such as regulation, technical challenges and lack of cooperation. Venture capital funds in crypto improved slightly in Q4 2022, but the recovery appears to be temporary. A steady gain in Q1 2024 could signal the end of the crypto winter. Despite CEO Jamie Dimon's criticism of Bitcoin, JPMorgan's blockchain division Onyx continues to grow rapidly, underscoring the bank's ongoing blockchain focus.

This update serves as a stepping stone to full Dansharding on Ethereum, a more efficient form of sharding. Originally, Ethereum required sharding by dividing the network into shards, but Dansharding uses temporary databases attached to blocks to hold additional data without changing Ethereum's block size or permanently storing data on-chain.

Crucially, these databases can increase the efficiency of Layer 2 networks built on top of Ethereum, such as Arbitrum and Optimism. By providing more temporary data capacity, protodanksharding allows Layer 2s to increase throughput and lower transaction fees without changing Ethereum itself. This enhancement of Layer 2 network activity will help boost Ethereum's performance, according to JPMorgan.

Bitcoin, on the other hand, faces headwinds that could limit major gains in 2024. JPMorgan warns of a 2024 tailwind as ETF approvals and the upcoming halving are already accounted for in Bitcoin's current price. After previous halvings slowed Bitcoin's market value growth relative to production costs, a corresponding slowdown after the 2024 halving would make sense. With Bitcoin's price already trading around double production costs, much of the upside associated with the downturn appears to have been eliminated.

Beyond technical improvements, crypto as an asset class still faces adoption challenges. The failure of decentralized finance to gain traction in mainstream banking and finance continues to be a source of frustration for JPMorgan.

The main traditional financial applications of blockchain technology run on private rather than public blockchains. Meanwhile, tokenization is still experimental thanks to a lack of regulations, uncoordinated technologies and central bank hesitancy over digital currencies.