JPMorgan: Disappointing Network Activity After Ethereum Shanghai Upgrade

According to The Block, financial giant JPMorgan recently released a report stating that Ethereum's network activity has not met market expectations since its Shanghai upgrade in April this year. Despite a significant decrease in energy consumption and a large increase in staking amounts, the growth in network activity has been relatively slow.

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JPMorgan: Ethereum Activity "Disappointing"

JPMorgan has stated that the network activity of Ethereum has been "disappointing" since the implementation of the Shanghai upgrade in April. Analysts led by Nikolaos Panigirtzoglou detailed this view in a report on Thursday, noting that while Ethereum's network energy consumption has decreased by over 99% due to the transition from proof-of-work to proof-of-stake with the Merge upgrade, and staking amounts have surged, the increase in network activity has not met expectations.

Bearish Factors Lead to Decline in Multiple Ethereum Metrics

The report further points out that Ethereum's daily trading volume, daily active addresses, and total value locked (TVL) in decentralized finance (DeFi) protocols are all showing a downward trend. They believe this could be due to factors such as market volatility from FTX and Terra, regulatory uncertainty in the United States, and a reduction in venture capital funding, among other "bearish factors" that may have offset the positive effects of the Shanghai upgrade on Ethereum network activity.

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Overly Optimistic Outlook on Shanghai Upgrade

Additionally, the performance of Ethereum's layer-two networks varies, with increased activity on Optimism and a decrease on Arbitrum. Analysts suggest that this indicates market expectations before the Shanghai upgrade may have been overly optimistic.

On the issue of centralization, analysts focus on liquidity staking protocols like Lido that dominate the market, raising concerns about centralization in Ethereum.

EIP-4844 May Not Be Effective in Saving

Looking ahead, the cryptocurrency industry is hopeful for Ethereum's EIP-4844 upgrade, known as "protodanksharding," to further boost network activity. However, JPMorgan analysts state that "persistent bearish crypto forces remain a headwind."

It is worth noting that protodanksharding is an innovative solution different from traditional sharding techniques, introducing temporary data packets that could increase Ethereum network throughput and reduce transaction costs. This upgrade was initially scheduled for the fourth quarter of this year but may be delayed to early next year.

JPMorgan Takes a Cautious View on Upgrade Positives

JPMorgan's report reveals the challenges Ethereum has faced in network activity since the Shanghai upgrade, despite a series of technical upgrades and market changes, Ethereum's performance has not met the expectations of some market participants. Moving forward, stakeholders will continue to monitor Ethereum's development and its upcoming technical upgrades in hopes of seeing an improvement in its market performance.