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This trend was revealed in a recent analysis carried out by U.S banking giant JP Morgan Chase.
The analysis focused on the Chicago Mercantile Exchange and compared the trading trend of bitcoin futures in the month of September. It was noticed that bitcoin futures traded below the price of bitcoin leading to a negative difference in price.
This was in contrast to Ethereum where the difference between its futures price and spot prices recorded a positive increase during this period. JP Morgan analysts concluded that the reason for the negative difference in bitcoin futures was due to weak demand from institutional investors.
It also noted that there was growing confidence in Ethereum and many investors have begun to move their capital towards the leading altcoin. The report from JP Morgan differs from an earlier analysis issued by Coinbase earlier in the year.
The US Exchange had noted in a report that institutions were going bullish on Bitcoin. It reported that exchanges had sold out over $670 million worth of btc to custody wallets which indicated that investors were holding the digital asset at that time.
What then could account for the turnaround by investors making them prefer Ethereum over Bitcoin? This article will focus on the features that make Ethereum more appealing to investors than Bitcoin.
One of the main reasons, (even one that JP Morgan recognizes) why investors have been buying Ethereum futures recently is because of the coin’s “London” upgrade that went live on the 5th of August last month.
The latest hard fork upgrade which got activated at Block 12,965,000, rolled out five new Ethereum Improvement Proposals (EIPs) namely the EIPs 1559, 3554, 3529, 3198, and 3541. According to the network’s management, the EIPs will help to improve the Ethereum network’s user experience, value proposition, and more features.
One big advantage that Bitcoin has over most cryptocurrencies, including Ethereum, is its limited supply which greatly reduces its chances of experiencing inflation and serving as a hedge for investors.
Ethereum, on the other hand, has an unlimited supply, making it prone to inflation. However, due to the recent London upgrade, the EIP 1559 in particular, the circulated supply of Ether will gradually reduce.
Before the upgrade, miners received ETH as a reward every time they validated a block, including the transaction fees paid by the users. But with the 1559 improvement, that system was abolished and a new one implemented.
Miners will no longer receive income from transaction fees; instead, those fees will be burned on the network, reducing the circulating supply of ETH over time and curbing the inflation rate of the coin.
When the burning of a portion of the transaction fee occurs, an amount of ETH will be removed from circulation, thereby increasing the demand for the cryptocurrency and causing its price to rise.
Currently, there are about 597,812ETH burned since the EIP-1559 update which is worth about $2,378,137,548.
The upgrade will also create ways for the Ethereum network to successfully switch from a proof of work to a proof of stake consensus mechanism, thereby increasing the difficulty of the mining algorithm, known as the Difficulty Bomb.
The proof-of-stakes algorithm aims to make transactions on the Ethereum blockchain scalable, and users will be able to earn rewards for using the network depending on the amount of ETH they stake instead of the amount of computing power they provide.
However, that transition is not yet ready, as it has been postponed to either December 2021 or early 2022. In summary, London's hard-for-fork upgrade of the Ethereum network opens new opportunities for investors who have Ether in their portfolio.
Another peculiar advantage of the Ethereum network, which must have attracted investors to buy more Ether futures, is the decentralized finance world. It is a whole network of financial products and services that are made available to any individual who can use Ethereum.
Investors who are exposed to the features that DeFi offers can have full control over their wealth, send and receive money across different countries, conduct borrowing and lending services etc.
Although Bitcoin, with its independence, was the first DeFi application, Ethereum has expanded the DeFi space by also creating opportunities for new financial products to rise.
As of the time of writing this article, DeFi has a total market cap of over 3 billion with most of the applications running on the Ethereum blockchain.
The question of how long institutional investors will continue to choose Ethereum over Bitcoin, according to JP Morgan, cannot be decided now.
However, as Ethereum's recent bull keeps rising due to its features becoming more appealing to investors, we can expect more to come from Ethereum.