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Investment bank JPMorgan has published a report explaining why ether is outperforming bitcoin. Citing several key reasons, the firm concluded that “there is evidence of more resilient liquidity, less reliance on derivatives markets to transfer and warehouse risk, and more durable underlying demand base – for now at least.”

JPMorgan published a report on Tuesday entitled “Why is ETH outperforming?” The analysts with the firm’s Fixed Income Strategy for the U.S. wrote:

In recent days, one of the more interesting developments in cryptocurrency markets has been the outperformance of ether (ETH) relative to other tokens.

Noting that bitcoin is “more of a crypto commodity than currency,” JPMorgan said that “ETH is the backbone of the crypto-native economy and therefore functions more as a medium of exchange.” The analysts then asserted that “To the extent owning a share of this potential activity is more valuable … ETH should outperform BTC over the long run.”

While the JPMorgan analysts noted that “Both BTC and ETH markets experienced a comparable liquidity shock earlier this month which triggered a comparable de-levering of their perspective derivatives market in subsequent days,” they pointed out:

But ETH spot market depth has recovered quicker and if anything liquidity conditions on some exchanges is better than prior to the event.

The analysts further explained that “High-frequency cash/futures basis pricing reveals a much smaller impact in ETH markets despite optically comparable net liquidations.” Furthermore, “open interest data also suggests that the other side of these trades was easier to source.”

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The report continues: “Higher turnover on the public ETH blockchain means a noticeably higher fraction of those tokens can be considered highly liquid, further blunting the impact of futures liquidations.”

The JPMorgan analysts further detailed: “In the case of ether versus bitcoin, there is evidence of more resilient liquidity, less reliance on derivatives markets to transfer and warehouse risk, and more durable underlying demand base – for now at least.”

The report adds that “In combination with the continued growth of Defi and other components of the ethereum-based economy, this suggests some technical but occasionally important bullish tailwinds versus bitcoin.” The analysts concluded:

ETH valuations may be less dependent on levered demand than BTC, a technical but occasionally important tailwind going forward.

Do you agree with JPMorgan on ether outperforming bitcoin? Let us know in the comments section below.

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