JPMorgan says Ethereum's recent upgrades haven't meaningfully boosted activity

Ethereum's recent Pectra upgrade helped push ether's price and market capitalization, but recent upgrades haven't resulted in stronger onchain activity, according to JPMorgan analysts.

"While the Pectra upgrade represents positive news, making Ethereum and its network even more attractive to institutions and distinguishing it from competitor platforms, successive upgrades have so far failed to boost Ethereum network activity meaningfully," JPMorgan analysts led by managing director Nikolaos Panigirtzoglou wrote in a report shared with The Block.

The Pectra upgrade earlier this month bundled several Ethereum improvement proposals (EIPs). These proposals aimed at improving staking efficiency, increasing rewards, and enabling faster deposits and withdrawals — features the JPMorgan analysts say make Ethereum more appealing to institutional investors.

That institutional focus is further reinforced by Ethereum's adoption of security token standards like ERC-3643 and ERC-1400, according to the analysts. These are specialized technical standards designed to help tokenized securities (like tokenized stocks or bonds) comply with traditional financial regulations. They include features for know-your-customer (KYC) and anti-money laundering (AML) checks, which are essential for regulated institutions. The inclusion of these standards makes Ethereum more compatible with real-world financial infrastructure, including support from firms like the Depository Trust and Clearing Corporation (DTCC) — a key player in U.S. securities settlement.

"This strategic shift towards encouraging further institutional engagement mirrors the trend seen in Bitcoin, where corporate and institutional engagement has significantly enhanced its appeal," the analysts said. "In this way, Ethereum is distinguishing itself from competitor platforms that primarily rely on individual user engagement, as evidenced by the significant meme coin activity on those competitor platforms."

Ethereum's CME futures positioning also reflects this institutional shift, the analysts noted. They said JPMorgan's institutional flow proxy, based on open interest and price movement in CME ETH futures, shows a sharp increase in long positions from institutional investors. However, spot Ethereum ETFs have seen relatively limited inflows — especially when compared to the strong demand for spot bitcoin ETFs following Donald Trump's election win — indicating weaker retail participation.

Overall, despite these upgrades and institutional signals, Ethereum's onchain activity has remained muted, according to the analysts. They noted that daily transactions and active addresses have not seen any meaningful increase. While total value locked in ETH terms has grown —likely due to increased lending and borrowing on decentralized exchanges— TVL growth has been weaker in dollar terms, they said.

They also flagged a decline in Ethereum fees, supported by greater adoption of Layer 2 networks, along with a rise in ETH's circulating supply since the Dencun upgrade. This has raised concerns about Ethereum turning inflationary amid subdued transaction activity, the analysts concluded.

JPMorgan analysts have been less bullish on Ethereum overall. Earlier this year, they said that Ethereum is likely to continue facing "intense competition" from rival blockchains, and said Bitcoin's dominance over Ethereum and altcoins is expected to persist through 2025.