Ethereum Suited for ‘Meteoric’ Stablecoin Growth, JPMorgan Says

Ethereum’s recent outperformance could continue as Wall Street begins issuing massive amounts of stablecoins within its ecosystem, JPMorgan signaled in a Thursday note.

A bevy of dollar-pegged tokens—following last month’s passage of the GENIUS Act, a regulatory framework for stablecoins—should affect Ethereum’s price, even if those assets are issued on layer-2 networks, instead of Ethereum itself, according to the bank’s analysts.

“We think ether is emerging as a direct way to gain exposure to the expected meteoric growth in stablecoins as the Ethereum network hosts most of these stablecoin assets, directly as the L1 or indirectly through some L2s,” the analysts wrote.

Ethereum changed hands around $4,54 on Thursday, a 3.5% decrease over the past day, according to crypto data provider CoinGecko. Although the cryptocurrency has surged recently, it has yet to eclipse its pandemic-era high of $4,900 in 2021.

With $138 billion worth of stablecoin’s issued on the network, Ethereum’s dominance stood at 51% of the $270 billion sector on Thursday, according to crypto data provider DefiLlama. JPMorgan analysts estimated last month that the sector could reach $500 billion in market value by 2028. The estimate is conservative compared to U.K. bank Standard Chartered, which predicted in a note last month that the market could hit $750 billion by the end of 2026. 

The stablecoin sector’s market cap increased for an eighth straight month in July, with year-to-date growth outpacing the crypto market itself, JPMorgan analysts noted.

“We think this dynamic—stablecoins growing faster than the crypto market—perpetuates the theme of stablecoins’ ongoing divergence from the broader crypto ecosystem as stablecoin use cases and adoption matures,” they wrote.

Increased activity on Ethereum’s network can affect the asset’s price because the fees that users pay to transact or engage with applications are removed from circulation, increasing its scarcity. This dynamic, at times, has offset Ethereum that’s issued through staking.

Not long ago, analysts questioned whether layer-2 networks were beneficial for Ethereum, pointing to a network upgrade last year that enabled them to save on costs. It benefited users but ultimately lowered Ethereum’s so-called burn rate to multi-year lows in April.

That was before Circle’s blockbuster IPO brought stablecoin hype to Wall Street and Robinhood unveiling of a layer-2 network showed how firms are tapping Ethereum’s ecosystem as a way to augment their businesses and potentially expand into new regions.

JPMorgan pointed to the passage of the GENIUS Act as a force catalyzing heightened activity in July across decentralized finance, NFTs, and spot markets, especially in the U.S. They also referenced “a more sustainable bridge between TradFi and DeFi that is being built by various partnerships and use cases,” suggesting the dynamic is sustainable.