Bitcoin, ethereum, and cryptocurrency prices are struggling after a bad start to 2022 (even as the non-fungible token (NFT) craze continues).
The bitcoin price has dropped 40% from its November high, while ethereum and its main rivals solana and cardano have held on to their gains better, reducing bitcoin’s dominance of the combined crypto market. Bitcoin now accounts for only 40% of the $2 trillion cryptocurrency industry, down from almost 60% a year ago.
Now, JPMorgan JPM -1.7 percent has cautioned that ethereum’s high transaction costs and network congestion risk giving competitor blockchain Solana NFT market dominance, which might be a “problem for ethereum’s value.”
“It looks like, similar to DeFi [decentralized finance] apps, congestion and high gas fees has been inducing NFT applications to use other blockchains,” JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, wrote in a note to clients last week, it was first reported by Business Insider. Ethereum transaction fees have sky-rocketed in recent months, with the network buckling due to the volume of users.
Ethereum’s NFT market share has fallen from around 80% from about 95% at the beginning of last year, JPMorgan’s team wrote in the note published last week. “If the loss of its NFT share starts looking more sustained in 2022, that would become a bigger problem for ethereum’s valuation,” they said, adding NFTs are currently the “fastest-growing universe in the crypto ecosystem.”
JPMorgan’s analysts found that since August, ethereum rival solana—the price of which is up a mind-numbing 3,600% over the last 12 months—has been winning NFT market share from ethereum. Solana is touted as a faster and cheaper alternative to ethereum but critics have said its network is overly centralized and it has suffered from a number of outages in recent months.
The ethereum price is meanwhile up an eye-popping 2,000% over the last two years, compared to bitcoin’s 400% increase over the same period. Investors have piled into ethereum over the last two years as interest in ethereum-based DeFi—using crypto technology to recreate traditional financial services—and digital media NFTs has exploded.
Earlier in the month, JPMorgan also warned ethereum is at risk of losing its DeFi dominance due to its failure to upgrade and scale its network as quickly as rivals such as solana and cardano. Ethereum has recently begun a long-awaited upgrade that’s expected to be completed this year but it’s feared it may not come soon enough to keep ethereum competitive.
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