Ethereum Upgrades Have Failed to Boost Network Activity in Meaningful Way: JPMorgan
JPMorgan’s recent research report highlights a disconnect between Ethereum’s successive upgrades and its on-chain activity. Despite improvements like the Dencun upgrade in March 2024 and the Pectra upgrade in early May, aimed at streamlining staking, enhancing wallet functionality, and boosting overall efficiency, neither daily transactions nor active addresses have seen a significant increase.
While the total value locked (TVL) on Ethereum did rise between these upgrades, this increase is attributed to heightened lending and borrowing activities on decentralized exchanges (DEXs). However, the dollar value increase appears less substantial than the increase measured in Ether (ETH) tokens, suggesting a potential influence of token price appreciation rather than a surge in actual on-chain activity.
The Pectra upgrade was intended to make ETH and the Ethereum network more attractive to institutional investors, differentiating it from competitors. However, this strategic aim hasn’t translated into a notable uptick in on-chain activity.
Following the Dencun upgrade, average and total transaction fees decreased, partially due to a migration towards layer-2 scaling solutions. This, coupled with an increase in Ether’s circulating supply post-Dencun, raises concerns about Ethereum potentially becoming an inflationary asset amidst sluggish transaction activity. This situation contrasts sharply with the recent significant price appreciation of Ether, which has risen over 45% in the last month.
JPMorgan’s analysis suggests that institutional investors played a pivotal role in this price rally, as indicated by futures market positioning. This divergence between price action and on-chain metrics underscores a critical point: while institutional interest and speculative trading may drive Ether’s price, the fundamental on-chain activity of the Ethereum network itself hasn’t experienced commensurate growth following the recent upgrades. This suggests that the network’s long-term success may depend on attracting and retaining a larger base of active users beyond institutional investors. The report’s findings raise questions regarding the overall effectiveness of the implemented upgrades in stimulating broader network adoption and usage.
