Investment bank JPMorgan has published a research report titled “Why is ETH Outperforming?” offering a detailed analysis of ether’s recent relative strength against bitcoin. The analysts from the firm’s Fixed Income Strategy for the U.S. noted that while both markets experienced a comparable liquidity shock and deleveraging of derivatives earlier this month, Ethereum’s market has shown greater resilience and faster recovery.
Ethereum as the Backbone of the Crypto-Native Economy
JPMorgan distinguished bitcoin as more of a “crypto commodity” while describing ether as “the backbone of the crypto-native economy”, functioning more as a medium of exchange. The report states:
“To the extent owning a share of this potential activity is more valuable … ETH should outperform BTC over the long run.”This view is grounded in Ethereum’s central role in decentralized finance (DeFi), non-fungible tokens (NFTs), and other on-chain applications, which generate higher on-chain turnover and make a larger fraction of ETH tokens highly liquid, thereby cushioning the impact of futures liquidations.
Stronger Liquidity Recovery and Lower Derivatives Dependency
The bank observed that although the early-month selloff triggered comparable deleveraging in both bitcoin and ether derivative markets, ETH spot market depth has recovered more quickly, with some exchanges even showing better liquidity than before the event. High-frequency cash/futures basis pricing revealed a much smaller impact in ETH markets despite optically comparable net liquidations. Furthermore, open interest data suggested that the other side of these trades was easier to source in the ether market, indicating more resilient liquidity.
The analysts concluded:
“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.”They added that ETH valuations may be less dependent on levered demand than BTC, a technical but occasionally important tailwind going forward.
DeFi Growth and Ethereum Ecosystem Tailwinds
The report highlighted the continued growth of DeFi and other components of the Ethereum-based economy as providing additional bullish momentum for ether relative to bitcoin. While bitcoin’s market dynamics are more tied to leveraged institutional flows, Ethereum benefits from a broader base of real economic activity on-chain. JPMorgan described these factors as “technical but occasionally important bullish tailwinds versus bitcoin.”
Overall, the analysis does not dismiss bitcoin’s long-term value proposition but suggests that in the current market environment, ether’s fundamental advantages in liquidity, derivatives exposure, and demand sustainability give it a near-term edge. The caveat “for now at least” signals that these conditions may shift as the market evolves, and investors should consider the distinct roles of both assets.