onchain
JPMorgan Warns Private Blockchains Pose Greater Threat to Bitcoin Than Strategy Sales
JPMorgan analysts highlight that the main long-term threat to Bitcoin is not sales by companies like Strategy but the shift of institutional activity to private blockchains, which could reduce liquidity and activity on public networks.
AS1 NewsSource: bitcoinmagazine.com
JPMorgan has issued a report suggesting that the biggest long-term risk to Bitcoin is not the recent sales by MicroStrategy (Strategy) but the increasing adoption of private blockchains by banks and institutions. While Strategy sold 3,588 bitcoins in early July to cover dividends, JPMorgan sees this as a short-term issue. The real concern is that activities such as tokenization, payments, and settlements may shift to permissioned blockchains, which are private and regulated, rather than public networks like Ethereum.
This shift could lead to a decrease in liquidity, weaker capital flows, and slower on-chain activity across the broader crypto ecosystem, eventually impacting Bitcoin. Institutions prefer permissioned blockchains because they offer privacy, regulatory compliance, governance, and legal accountability. Such preferences could challenge the dominance of public networks, especially for use cases like tokenized deposits and real-world asset tokenization.
The report notes that tokenized deposits backed by banking regulation and deposit insurance could become more prevalent, potentially crowding out stablecoins in institutional payments. Projects like SWIFT's blockchain initiatives and central bank digital currencies (CBDCs) such as digital euro and digital yuan are aligned with this regulated approach.
While the current market for real-world asset tokenization is around $50 billion, much of it remains experimental on Ethereum. As adoption matures, issuance and settlement might migrate to private infrastructure, which could reduce the role of public chains for regulated entities. This trend is exemplified by organizations like DTCC and Securitize.
The analysts acknowledge that certain developments, such as a hybrid model or increased stablecoin adoption, could mitigate these risks. However, the overall outlook suggests that private blockchains could pose a significant structural challenge to the public crypto ecosystem and Bitcoin's role within it.
The shift towards private blockchains by institutions could reduce activity on public networks, potentially impacting Bitcoin's ecosystem and liquidity.