A recent recovery in decentralized finance and non-fungible tokens, while positive, is not yet strong or compelling, according to JPMorgan.
“While we have no doubt that this recent uptick in DeFi/NFT activity is a positive sign, we think it is too early to get excited about it,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a Thursday note report. These are “only tentative signs of recovery,” they said.
After a nearly two-year slowdown, NFT sales volume and the overall value of DeFi have increased in recent months. The recovery has created “some optimism that the worst may be behind us in terms of the medium-term trajectory for DeFi/NFT activity,” but it’s premature to be optimistic about that, analysts say.
That’s because some recovery in DeFi is “natural” given increased crypto trading activity, some of which is sent via decentralized exchanges. Liquid staking led by Lido has also helped DeFi improve since early 2023, long before the hype over spot bitcoin ETF approval, the analysts said.
The price of ether, meanwhile, has underperformed other cryptocurrencies, meaning that measuring its total value, captured in ether terms, “would mechanically show some rebound as the price of several smaller cryptocurrencies has risen by more than ether in recent months increased,” the analysts said. .
Ethereum is lagging behind in the DeFi/NFT resurgence
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The company’s well-known problems, including high fees and slow transaction speeds, have hampered blockchain growth despite the recent resurgence of DeFi/NFT, JPMorgan analysts said. “Ethereum does not appear to have benefited much from the recent resurgence in DeFi/NFT activity,” the analysts said.
The emergence of new blockchains, DeFi protocols and NFT platforms, such as Aptos, Sui, Sei, Celestia and Blur, is ‘encouraging’, according to the analysts. They added that upcoming Ethereum upgrades could address the blockchain’s scalability issues and potentially maintain its dominance, but that the timing and effectiveness of these upgrades remain uncertain.
