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Investment bank JPMorgan published a report on Tuesday in which it explained Ethereum’s (ETH) strong performance recently. In the report titled “Why is ETH outperforming” the firm’s analysts broke down why ETH is currently outperforming Bitcoin (BTC). The report was sent out as a note to the bank’s investors.
Coming up with multiple reasons, the report concluded that “there is evidence of more resilient liquidity, less reliance on derivatives markets to transfer and warehouse risk, and more durable underlying demand base – for now at least.”
“In recent days, one of the more interesting developments in cryptocurrency markets has been the outperformance of ether (ETH) relative to other tokens,” the analysts reflected on the recent surge of the number two cryptocurrency.
JPMorgan noted that Bitcoin is “more of a crypto commodity than currency.” According to the analysts, ETH cis be considered the backbone of the crypto-native economy by functioning more as “a medium of exchange.” “To the extent owning a share of this potential activity is more valuable … ETH should outperform BTC over the long run,” the report added.
Despite “Both BTC and ETH markets experienced a comparable liquidity shock earlier this month which triggered a comparable de-levering of their perspective derivatives market in subsequent days,” the report clarifies:
“But ETH spot market depth has recovered quicker and if anything, liquidity conditions on some exchanges are better than prior to the event.”
The report continued explaining ETH recent power play:
“High-frequency cash/futures basis pricing reveals a much smaller impact in ETH markets despite optically comparable net liquidations.”
“Open interest data also suggests that the other side of these trades was easier to source.”
Noteworthy, the JPMorgan analysts absolutely delivered a quality in-depth analysis. The report further noted:
“Higher turnover on the public ETH blockchain means a noticeably higher fraction of those tokens can be considered highly liquid, further blunting the impact of futures liquidations.”
“In the case of ether versus bitcoin, there is evidence of more resilient liquidity, less reliance on derivatives markets to transfer and warehouse risk, and more durable underlying demand base – for now at least,” the report read.
The report concluded that “In combination with the continued growth of Defi and other components of the Ethereum-based economy, this suggests some technical but occasionally important bullish tailwinds versus bitcoin.” Therefore “ETH valuations may be less dependent on levered demand than BTC, a technical but occasionally important tailwind going forward.”
At the time of writing, according to CoinMarketCap data, ETH is trading at $2,754.86, a gain of almost 24% in the past seven days. BTC won almost 9% over the past week and is trading at $54,092.47. Market capitalization of both assets are roughly $1 trillion for BTC and $320 billion for ETH.