JP Morgan explains why Ethereum is outperforming Bitcoin

Ethereum surged to record highs this week amid a wave of institutional interest and improved liquidity in light of last week's liquidation cascade on derivatives exchanges

Multinational bank and asset manager JP Morgan has published a note to investors stating that Ethereum is outperforming Bitcoin due to improvements in liquidity and a higher turnover on the public Ethereum blockchain.

The comments were made after Ethereum printed a record high of $2,750 on Tuesday, while Bitcoin struggled to gain momentum at $55,000, which is $10,000 below its respective all-time high.

“Both BTC and ETH experienced a comparable liquidity shock earlier this month which triggered a comparable de-levering event of their respective derivatives markets in subsequent days.” The note began.

“But ETH spot depth has recovered quicker and if anything liquidity conditions on some exchanges is better than prior to that event.

“Higher turnover on the ETH public blockchain means a noticeably higher fraction of those tokens can be considered highly liquid, further blunting the impacts of futures liquidations.

ETHUSD chart by TradingView

“This suggests that ETH valuations may be less dependent on levered demand than BTC, a technical but occasionally important tailwind moving forward.”

At the time of writing Ethereum is trading at $2,700 while Bitcoin is back below $55,000 following an overnight rejection from the $55,800 level of resistance.

eToro market analyst Simon Peters has attributed the recent rise in Ethereum to a wave of demand from institutional investors.

He said: “Underlying this is demand from institutional investors. While they may now have some exposure to Bitcoin, institutions are now diversifying their exposure and Ethereum is the natural next pick, and that leaves the second biggest cryptoasset by market cap well placed to benefit further.”

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