Ethereum Struggles While JP Morgan Highlights Its Core Infrastructure Role: What's Behind the Mixed Evaluation?

[Block Media Reporter Ham Ji-hyun] Global investment bank JP Morgan has published a report highlighting Ethereum (ETH) as a key blockchain infrastructure supporting decentralized finance (DeFi), stablecoins, and tokenized assets.

The market views this report as significant because it describes Ethereum as the core infrastructure of the digital asset ecosystem in educational materials for investors from a global financial institution in traditional finance.

In the report titled "Ethereum Fundamentals: Smart Contracts, Decentralization, and Financial Applications (Apps)" published at the end of last month, JP Morgan defined Ethereum as "a smart contract blockchain that supports decentralized applications and digital assets."

The report explains that while early blockchains primarily focused on peer-to-peer (P2P) value transfer, Ethereum has expanded the scope of blockchain utilization by allowing developers to build financial applications, marketplaces, and tokenized assets directly on-chain.

"Ethereum's 'Programmability' is Its Key Competitive Advantage"

A key point emphasized by JP Morgan is Ethereum's 'programmability.'

Through smart contracts, programs can be automatically executed based on predetermined conditions, allowing various financial services such as token issuance, decentralized exchanges (DEX), lending, derivatives, and asset management to be implemented without centralized intermediaries.

The report evaluates Ethereum as "the largest and most widely adopted smart contract platform," identifying four core elements that constitute Ethereum's competitiveness: △ programmability △ decentralization △ depth of the ecosystem △ adaptability.

Notably, JP Morgan highlighted that Ethereum supports a large-scale on-chain ecosystem encompassing not only decentralized finance but also stablecoins and non-fungible tokens (NFTs) and tokenized assets.

An interesting aspect of this report is that it does not treat Ethereum merely as an investment target.

JP Morgan explained that Ethereum is a major network for stablecoins and tokenized assets, which are increasingly being used for payments, settlements, and digital representations of physical assets.

As a result, ETH also possesses unique utility. For instance, it is used as transaction fees on the Ethereum network or rewarded to validators participating in network security through proof of stake (PoS).

Ultimately, as financial, payment, and tokenization activities expand within the Ethereum ecosystem, the role of ETH, the core asset that powers the network, is likely to gain more attention.

JP Morgan Approaches from a 'Portfolio Asset' Perspective

JP Morgan also presented a separate approach for investors regarding Ethereum.

A typical method mentioned is to hold ETH directly or use exchange-traded products (ETPs). While holding directly requires managing digital wallets, private keys, and custody, exchange-traded products allow for relatively easier investment but may have limitations in directly interacting with the Ethereum network.

From a portfolio perspective, Ethereum can be evaluated as: △ exposure to the growth of blockchain technology infrastructure supporting Web3 and financial applications △ part of alternative investments or opportunistic asset allocation △ an asset complementing other digital assets with different network structures and use cases.

However, it added that the appropriate portfolio weight for Ethereum may vary depending on the investor's objectives, investment period, risk tolerance, and liquidity needs.

Through this report, JP Morgan focused on the network functionality of Ethereum and its potential as a financial infrastructure rather than forecasting the price of ETH. This can be interpreted as a case showing that the perspective of traditional finance on digital assets is expanding beyond simple price fluctuations or speculative assets to evaluate the functionality and utility of blockchain-based financial infrastructure.

In the future, Ethereum's competitiveness may increasingly be assessed not only by the price of the asset ETH but also by how many financial activities and assets it can attract to the network. This is because global financial institutions are actively examining the potential of blockchain for stablecoins, tokenization of real-world assets (RWA), and on-chain payments and settlements.

JP Morgan stated, "Ethereum's programmable design and extensive ecosystem distinguish it from other blockchains that focus solely on asset transfer," adding, "Understanding these fundamental characteristics can help investors more carefully assess Ethereum's potential role in the changing digital asset environment."

JP Morgan Presents Different Approaches to ETH and Ethereum

The market is paying attention to the fact that just two months ago, JP Morgan viewed ETH investment skeptically.

In a report from May, JP Morgan projected that the trend of Ethereum and altcoins not keeping pace with Bitcoin's rise could continue for some time. At that time, the analysis team diagnosed that institutional investor funds were relatively concentrated on Bitcoin and that the gap could persist unless Ethereum's network activity and practical use cases significantly improved.

In particular, it pointed out that technological upgrades aimed at increasing Ethereum's scalability do not necessarily lead to an increase in ETH's value. The analysis suggested that during the process of reducing transaction costs on Layer 2 (L2), the fee income from the Ethereum mainnet and the amount of ETH burned could decrease, potentially weakening ETH's price support.

Thus, while JP Morgan approached the ETH asset itself conservatively, it positively evaluated the functionality and use cases of the Ethereum blockchain network.

In other words, JP Morgan is applying different standards to 'ETH as an investment asset' and 'Ethereum as a financial infrastructure.' While recognizing the technological and financial potential of the Ethereum ecosystem, it views the growth of this network as a separate issue from whether it directly leads to an increase in ETH prices or investment performance compared to Bitcoin.

Meanwhile, according to CoinMarketCap, ETH is trading at $1,872, down 2.76% from the previous day. This is approximately 62.20% lower than the price of $4,953 reached last August, when it hit an all-time high.

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