Analysts at JPMorgan led by Nikolaos Panigirtzoglou have suggested Ethereum’s ether ($ETH) is a better bet than Bitcoin ($BTC) as interest rates rise because the second-largest cryptocurrency by market capitalization powers an ecosystem of decentralized applications.

According to Business Insider, in a recent report, JPMorgan’s analysts noted that rising interest rates could put downward pressure on the price of bitcoin, just as they traditionally do for gold. Bitcoin’s price has boomed over the last few years, in a world where ultra-low interest rates and massive bond buying have been the norm.

This has flooded markets with cash and led many to believe they are now getting overheated. As Bitcoin is a hedge against inflation being caused by these policies, its price has been surging as more investors seek refuge.

Yet, the report points out central banks are now cutting back on their bond-buying sprees to cool growing inflation, which will lead to rising interest rates and bond yields. The Bank of England said this month that “over the coming months,” interest rates have to rise, while the U.S. Federal Reserve cut back on its $120 billion monthly bond purchases.

Taking this into account, JPMorgan’s analysts said investors may be better off holding Ethereum’s ether, as it has more uses than bitcoin and interest in it could remain stronger when interest rates rise.

The Ethereum network is used to power decentralized finance (DeFi) applications and various marketplaces where non-fungible tokens (NFTs) are both minted and traded. Panigirtzoglou wrote:

With ethereum deriving its value from its applications, ranging from DeFi to gaming to NFTs and stablecoins, it appears less susceptible than bitcoin to higher real yields.

The strategist added that a rise in bond yields and a normalization of monetary policy could put downward pressure on bitcoin, the same way higher real yields have put downward pressure on gold.

The analysts noted Ethereum may also be a better bet over the long run because of its transition from a Proof-of-Work (PoW) mining algorithm to a Proof-of-Stake (PoS) algorithm, which will allow to have a smaller environmental impact.

They wrote:

The greater focus by investors on [environmental, social and governance investing] has shifted attention away from the energy intensive bitcoin blockchain to the ethereum blockchain.

JPMorgan did say that both cryptoassets appear to be overvalued in current market conditions. As reported, JPMorgan has also recently published a  deep dive into the cryptocurrency space and renewed in their analysis their $146,000 per bitcoin price prediction in the long run, if the cryptocurrency’s volatility drops and institutional investors prefer BTC over gold.

The analysts revealed they see bitcoin as a scarce product that is increasingly competing with gold for investors’ preference as a hedge against inflation. Gold, they argued, failed to respond in recent weeks to heightened concerns over inflation, which is at a 13-year high in the United States and surge all around the world.

Per the analysts, taking into account how “big the financial investment into gold is,” any such “crowding out of gold as an ‘alternative’ currency implies big upside for bitcoin.” The analysts pointed to a $146,000 long-term price target, but noted that for it to come true bitcoin’s volatility would have to fall sharply,

The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.

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