JPMorgan has expressed a cautious outlook on the recent uptick in decentralized finance (DeFi) and non-fungible tokens (NFTs), deeming the signs of revival as “only tentative.” Analysts led by Nikolaos Panigirtzoglou at JPMorgan conveyed their perspective in a report issued on Thursday.
The report acknowledges the positive turn in DeFi and NFT activity after nearly two years of stagnation, with increased NFT sales volume and a rise in the total value locked in DeFi over recent months. However, JPMorgan remains reserved about the strength and conclusiveness of this recovery.
“While we do not doubt this recent revival in DeFi/NFT activity is a positive sign, we believe it is too early to be getting excited about it,” stated the analysts. They emphasize that these developments are “only tentative signs of revival” and caution against premature optimism.
JPMorgan points out that some recovery in DeFi is a natural outcome of increased crypto trading activity, facilitated by decentralized exchanges. Liquid staking, particularly led by Lido since early 2023, has played a role in DeFi improvement, predating the hype surrounding the potential approval of a spot bitcoin ETF.
Despite the overall positive sentiment, the report notes that Ethereum, a prominent blockchain in the DeFi/NFT space, has faced challenges such as high fees and low transaction speeds. The price performance of ether, Ethereum’s native cryptocurrency, has also underperformed compared to other cryptocurrencies. The analysts highlight that measuring total value locked in ether terms could show some revival, but this might be influenced by the rise in the prices of smaller cryptocurrencies relative to ether.
JPMorgan acknowledges the emergence of new blockchains, DeFi protocols, and NFT platforms, citing projects like Aptos, Sui, Sei, Celestia, and Blur as encouraging developments. The analysts suggest that upcoming upgrades to Ethereum could address scalability issues, potentially supporting its continued dominance. However, they caution that the timing and effectiveness of these upgrades remain uncertain.
