JPMorgan Chase's Big Analysis: Four Factors That Make Ethereum Outperform Bitcoin

According to a recent JPMorgan research report, Ethereum (ETH) has significantly outperformed Bitcoin (BTC) due to four key structural and policy-driven factors.

Potential Opening of Staking Functionality: A major advantage for Ethereum is its Proof-of-Stake mechanism. If the SEC approves staking for spot Ethereum ETFs, these funds could generate additional yield for holders, transforming them into income-generating products, unlike Bitcoin ETFs which have no native yield mechanism.
Increased Corporate Adoption: Approximately 10 public companies now hold Ethereum on their balance sheets. More importantly, these firms are actively participating in the ecosystem by running validator nodes or employing DeFi strategies, signaling a shift from speculative holding to sustainable asset allocation.
Softer Regulatory Stance on Staking Tokens: The SEC staff has indicated that liquidity staking tokens (LSTs) may not be considered securities. This clarification reduces regulatory uncertainty and is likely to encourage more institutional capital to enter the Ethereum staking and derivatives markets.
Optimized ETF Redemption Mechanism: The recent SEC approval of in-kind redemptions for ETFs allows investors to redeem shares for the underlying asset directly. This improves efficiency, enhances liquidity, and reduces selling pressure on the market. This benefits Ethereum more due to its lower institutional ownership, suggesting greater room for growth.

JPMorgan concludes that while Bitcoin remains "digital gold," Ethereum is evolving into the "infrastructure of the digital economy" with greater potential for growth in ETF adoption, corporate use, and its expansive DeFi and application ecosystem.

By BitpushNews

Over the past few weeks, a noteworthy trend has emerged in the crypto markets: Ethereum (ETH) has significantly outperformed Bitcoin (BTC).

According to a recent JPMorgan research report, Wall Street analysts attribute this phenomenon to four key factors: optimized ETF structures, increased holdings by corporate finance departments, a softening of regulatory stances, and the potential liberalization of staking functionality. These factors not only explain Ethereum's recent strength but also suggest further potential for future growth.

1. Market Background: Dual Drive from Policies and Capital Flows

In July, the US Congress passed the GENIUS Act, a stablecoin bill that brought unprecedented institutional benefits to the crypto market. Subsequently, Ethereum spot ETFs attracted a record $5.4 billion in inflows in July alone, almost matching the inflows of Bitcoin ETFs.

However, in August, Bitcoin ETFs experienced a small outflow of funds, while Ethereum ETFs continued to see a net inflow of funds. This divergence in capital flows became the direct trigger for Ethereum to outperform Bitcoin.

Meanwhile, the market awaits the upcoming September vote on the Crypto Market Structure Act. Investors widely anticipate this will mark another major turning point, similar to the stablecoin legislation. Driven by both policy and market expectations, Ethereum's position in the capital market is rapidly rising.

2. Analysis of four major factors: Why does Ethereum outperform Bitcoin?

JPMorgan analyst Nikolaos Panigirtzoglou and his team clearly pointed out in the report that Ethereum's strength comes from the following four core driving factors:

1. Potential opening of staking functionality

Currently, a major feature of the Ethereum ecosystem is its Proof-of-Stake (PoS) staking mechanism. Users need at least 32 ETH to run their own validator node, but this threshold is relatively high for most institutional and retail investors.

If the U.S. Securities and Exchange Commission (SEC) ultimately approves staking for spot Ethereum ETFs, fund managers could generate additional returns for holders without requiring investors to run their own nodes. This would transform spot ETH ETFs into more than just price tracking tools, transforming them into passive investment products with income.

This is fundamentally different from Bitcoin's spot ETF: Bitcoin itself does not have a native income mechanism, while Ethereum ETF may come with its own "interest" in the future, which obviously increases its market appeal.

2. Increased holdings and application by corporate finance departments

JPMorgan Chase pointed out that currently about 10 listed companies have included Ethereum in their balance sheets, accounting for about 2.3% of the total circulation.

What’s more noteworthy is that some companies are not just “buying and holding” but are further participating in the ecosystem:

Run a verification node: directly obtain staking rewards.
Adopt a liquidity staking or DeFi strategy: invest ETH in derivative protocols to earn additional returns.

This means that Ethereum is gradually evolving from a "speculative asset" to a "sustainable asset allocation tool for enterprises." This trend is exactly what Bitcoin has not yet fully achieved.

The involvement of corporate finance departments represents the entry of a more long-term and stable capital pool, and also enhances the market's valuation anchor for Ethereum.

3. Regulators soften their stance on liquidity staking tokens

Previously, the SEC has always had disputes over the compliance of liquidity staking tokens (LSTs) such as Lido and Rocket Pool. The market is worried that these tokens will be identified as securities, thereby affecting the participation of large-scale institutions.

However, the latest development is that the SEC staff has issued a clarifying opinion that "it may not be considered a security." Although formal legislation has not yet been enacted, this statement has greatly alleviated institutional concerns.

In this context, institutional funds that were originally on the sidelines regarding compliance may enter the Ethereum staking and related derivatives markets faster and on a larger scale.

4. Optimization of ETF redemption mechanism: Approval of in-kind redemption

The SEC recently approved a physical redemption mechanism for spot Bitcoin and Ethereum ETFs. This means that when institutional investors redeem ETF shares, they no longer have to go through the cumbersome process of first selling the ETF for cash. Instead, they can directly withdraw the equivalent amount of Bitcoin or Ethereum.

This mechanism brings three major benefits:

Improve efficiency: save time and costs.
Enhanced liquidity: ETFs are directly linked to the spot market.
Reduce selling pressure: Avoid triggering market sell-offs when large-scale redemptions occur.

This system is also beneficial for Bitcoin and Ethereum, but because Ethereum accounts for a relatively low proportion of corporate and institutional holdings, it means there is greater room for future growth and the marginal effect is more significant.

3. Future Outlook: Has Ethereum’s potential surpassed Bitcoin?

JPMorgan Chase pointed out in the report that although Bitcoin remains the leading "store of value" in the crypto market, Ethereum has greater room for growth:

ETF adoption: The funding scale of ETH ETF is still lower than that of BTC, but as the staking function is liberalized, it is expected to attract more long-term funds.
Corporate adoption: Bitcoin has long been held by a large number of companies and institutions, while Ethereum is still in its infancy and has huge room for future growth.
DeFi and application ecology: Ethereum is not only a digital asset, but also carries applications such as decentralized finance (DeFi), NFT, stablecoins, AI+ on-chain computing, and thus has richer usage scenarios.

In other words, Bitcoin is more like "digital gold", while Ethereum is evolving into "the infrastructure of the digital economy."

IV. Conclusion

JPMorgan's analysis reveals a key logic: Ethereum's strength is not driven by short-term speculation, but is based on the cumulative effect of four factors: favorable policies, structural optimization, institutional adoption and potential returns.

With the further improvement of the ETF mechanism, the continued increase in holdings by corporate finance departments, and the possible future policy confirmation of the SEC, Ethereum is expected to gradually narrow or even surpass Bitcoin's advantages in the future market landscape.

For investors, this trend is not only a signal of capital flow, but may also mean the turning point of the entire crypto market from "single value storage" to "multi-dimensional application ecology."

In this new chapter in the history of cryptocurrencies, Bitcoin may still be “digital gold,” but Ethereum is rapidly growing into the “heart of the digital economy.”