Here’s why JP Morgan analysts recommend Ethereum over Bitcoin

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The rival­ry between the top two cryp­tocur­ren­cies, Bit­coin and Ether, has been messy and long drawn out. And this has pre­sent­ed an omnipresent dilem­ma for poten­tial investors.

While each cur­ren­cy has its own com­pet­ing qual­i­ties, ana­lysts at finan­cial ser­vices firm JP Mor­gan have assert­ed that investors would be bet­ter off hold­ing Ethereum rather than Bit­coin at a time when inter­est rates are on the rise.

In a recent­ly released report, a team of JPMor­gan ana­lysts, led by mar­ket strate­gist Niko­laos Pani­girt­zoglou, not­ed that the high­er inter­est rates could prove to be detri­men­tal to the “dig­i­tal gold” Bit­coin, just as they do for tra­di­tion­al gold. How­ev­er, since the Ethereum blockchain is the pow­er hub of DeFi and NFTs, its far wider use cas­es could con­tin­ue to gen­er­ate inter­est in its native token.

Last year’s lock­down induced eco­nom­ic slow­down had result­ed in unbe­liev­ably low-inter­est rates and bond invest­ments, lead­ing to a surge in cash flow and infla­tion. Bit­coin had flour­ished in this sce­nario due to its per­cep­tion of being a hedge against infla­tion. How­ev­er, now that cen­tral banks are step­ping away from pro­vid­ing this increased stim­u­lus in an effort to curb strong infla­tion, inter­est rates and bond yields might once again see an uptick.

Pani­girt­zoglou not­ed in the report,

“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.”

PoW vs PoS

On the oth­er hand, Ethereum has been the main dri­ving force behind a boom in decen­tral­ized finan­cial activ­i­ties and NFT trad­ing, lead­ing to the assump­tion that larg­er mar­ket forces might not be able to affect its token price too much. The report said,

“With Ethereum deriv­ing its val­ue from its appli­ca­tions, rang­ing from DeFi to gam­ing to NFTs and sta­ble­coins, it appears less sus­cep­ti­ble than bit­coin to high­er real yields.”

Anoth­er fac­tor that works in the blockchain’s favor is its shift to more envi­ron­men­tal­ly friend­ly tech­nol­o­gy, accord­ing to the report. Bit­coin has been increas­ing­ly riled over the past year for using the ener­gy exten­sive Proof-of-Work algo­rithm for mint­ing new tokens.

Ethereum, how­ev­er, is already under the process of com­plete­ly shift­ing to the Proof-of-Stake mech­a­nism by the end of next year, mak­ing its val­i­da­tion and secu­ri­ty sys­tem far more ener­gy-effi­cient and a prefer­able choice for investors, accord­ing to the JP Mor­gan report, which stated,

“The greater focus by investors on [envi­ron­men­tal, social and gov­er­nance invest­ing] has shift­ed atten­tion away from the ener­gy-inten­sive bit­coin blockchain to the Ethereum blockchain.”

Although, the over­all con­clu­sion of the report not­ed that both cur­ren­cies were cur­rent­ly over­val­ued and not a prefer­able choice for insti­tu­tion­al investors due to their high volatility.

A recent report by Krak­en had the oppo­site to say, how­ev­er, as it not­ed that Bit­coin might still have a chance to achieve high­er highs before the cycle end­ed. Con­trast­ing­ly, Ethereum’s strong per­for­mance might be end­ing as it faces stiff com­pe­ti­tion from the likes of Car­dano and Solana, lead­ing to a fall in mar­ket dominance.

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