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Coinpaper 2025-01-18 14:14:01

JPMorgan Identifies Factors for Bitcoin's Continued Dominance

As of the time of writing, Bitcoin's dominance stands at 54%, while Ethereum's is at 11.14%. The report highlights eight key factors that could contribute to Bitcoin's ongoing dominance. Influx into ETFs Analysts believe that the narrative of Bitcoin as a digital component of ”debasing trade” continues to attract significant inflows into spot Bitcoin ETFs from both retail and institutional investors. In contrast, Ethereum-based instruments have shown only modest interest, attracting $2.6 billion since their launch. This indicates limited demand for future altcoin-based exchange-traded funds, according to JPMorgan. MicroStrategy MicroStrategy is ”only halfway” toward realizing its plan to raise $42 billion for purchasing Bitcoins, analysts noted. They believe the company's ”Plan 21/21” provides additional momentum for the leading cryptocurrency. Crypto Reserves JPMorgan suggested that the U.S. decision to create a cryptocurrency reserve solely in Bitcoin could further strengthen its position. Previously, colleagues at Fidelity Digital Assets predicted that not only the U.S. would pursue this path. Layer 2 Solutions As a fourth factor, analysts pointed to advancements in Layer 2 solutions for Bitcoin, which they believe challenge platforms like Ethereum. Blockchain Transition The fifth factor involves the shift of institutional blockchain applications for trading digital bonds and transaction settlements to private blockchains or consortium blockchains. JPMorgan believes these alternatives offer greater privacy and personalization, reducing the appeal of public blockchains for large institutions. Infrastructure Development New projects are increasingly focused on infrastructure development rather than token issuance. According to the report, this marks a departure from coin-centric strategies seen during the bull market of 2021-2022. An example cited is Base, which gained popularity without launching its own token. Long-term Utility Finally, analysts noted that while many DeFi projects succeeded early on, user activity and token prices declined as the initial hype faded. They pointed out that examples like Friend.tech, Farcaster, and Lens highlight the need for additional time to demonstrate long-term utility. At the same time, the report authors indicated that in anticipation of regulatory clarity from the new U.S. administration, the cryptocurrency market remains in a consolidation phase. They do not rule out delays in this process, as authorities are likely to focus on resolving other issues first. It is worth noting that Steno Research predicted a decline in Bitcoin's dominance to 45% by 2025.

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