Analysts at JPMorgan led by Nikolaos Panigirtzoglou have revealed they see Ethereum ($ETH), the second-largest cryptocurrency by market capitalization, losing market share to rivals like Solana ($SOL) when it comes to non-fungible tokens (NFTs).
According to a note shared with clients, reported on by Business Insider, the analysts wrote that Ethereum’s volume share of non-fungible token trading fell from 95% at the start of 2021 to 80% as a result of the high transaction fees seen on the cryptocurrency’s network.
The analysts wrote that just like with decentralized applications “congestion and high gas fees” have been “inducting NFT applications to use other blockchains.” The analysts found that Solana ($SOL) has been a primary beneficiary as it has been seizing market share from Ethereum.
If the loss of its NFT share starts looking more sustained in 2022, that would become a bigger problem for ethereum’s valuation.
The NFT market has grown to surpass $12 billion over the past year, with some collections selling for millions. NFTs are cryptoassets that have unique identification codes and metadata distinguishing them from each other. Unlike BTC and ETH, they cannot be traded as equivalents.
The average transaction fee on the Ethereum blockchain has at some points surpassed the $80 mark, forcing smaller traders off of the network. Blockchains like Solana have been built with scalability in mind and are able to accommodate a higher number of transactions per second.
Other networks, including WAX and Tezos, are reportedly also gaining market share, JPMorgan’s analysts said. Notably, late last year analysts at the investment bank said ethereum has more growth potential than bitcoin as interest rates rise, as it powers an ecosystem of decentralized applications.
As CryptoGlobe reported, Alkesh Shah, a digital asset strategist at Bank of America has revealed he believes Solana has the potential to “become the Visa” of the cryptocurrency space as it focuses on scalability, low transaction fees, and ease of use.
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.
Featured image via Unsplash