In its latest report, banking giant JPMorgan has said that Ethereum’s high gas fees and network congestion are posing a major risk to the smart contract platform. JPMorgan says that this could be a “problem for the valuation of Ethereum.”
It specifically added that Ethereum could lose its NFT market share to rival Solana, who has gained a big foothold over the past year. If we look at the data, Ethereum’s NFT market share has dropped to 80% from 95% at the beginning of 2021.
In the report, first shared via Business Insider, JPMorgan says that NFT is “the fastest growing universe in the crypto ecosystem.” Therefore, if the loss of its NFT stock starts to be more sustained in 2022, that will become a bigger problem for Ethereum’s valuation.”
JPMorgan analysts also note that data shows that NFT players have moved from Ethereum to Solana amid faster transaction speeds and low costs.
Ethereum is at risk of losing DeFi dominance
Another area we need to focus on is Ethereum’s declining market share in the world of decentralized finance (DeFi). Last week, in a note to clients, JPMorgan analysts led by Nikolaos Panigirtzoglou, wrote:
“It looks like, similar to DeFi [decentralized finance] applications, congestion, and high gas fees have caused NFT applications to use other blockchains.”
Ethereum has a major challenge ahead of it either quickly scaling to PoS Ethereum 2.0 or eventually losing market share to other competitors like Solana, Avalanche, Cardano, and others.
Recently, we have also seen that Ethereum price has moved sideways amid the recent consolidating crypto market. According to our technical analysis, ETH price is currently trading at key support levels and at risk of another 20% drop. As Ethereum hikes interest rates to 3-month low, here’s what investor sentiment suggests.