A heated debate over Ethereum’s pricing power and value proposition is unfolding between Wall Street and the traditional crypto market.
In mid-May 2026, JPMorgan’s analyst team released a report stating that unless there is substantial improvement in Ethereum network activity, decentralized finance (DeFi), and real-world applications, Ethereum’s persistent underperformance relative to Bitcoin since 2023 will likely continue. Around the same time, Fundstrat co-founder Tom Lee once again reiterated his extremely bullish stance on ETH—with a target price of $62,000.
These two narratives clashed head-on: one points to structural weakness, the other to a historic opportunity. According to Gate market data, as of May 18, 2026, ETH was priced at $2,121.01, down 2.42% over the past 24 hours. This price sits right at a critical juncture closely watched by both bulls and bears.
The Starting Point: Two Reports, Two Paths
On May 15, 2026, a crypto market analysis report led by JPMorgan Managing Director Nikolaos Panigirtzoglou was released. The core assessment: although the overall market stabilized after the sell-off triggered by geopolitical tensions in Iran, the rebound in Ethereum and other altcoins was noticeably weaker than that of Bitcoin. The report argued that unless Ethereum demonstrates real improvement in on-chain activity, DeFi, and practical use cases, its relative weakness against Bitcoin will persist.
Tom Lee’s response was equally direct. He publicly reaffirmed his extremely bullish $62,000 price target for ETH. This target isn’t arbitrary—his core logic is that Ethereum’s market cap would need to reach about 25% of Bitcoin’s, a historically significant structural premium. He also offered two additional scenarios: $12,000 (if the ETH/BTC ratio returns to the eight-year historical average) and $22,000 (if it returns to the 2021 bull market peak ratio).
This debate didn’t arise out of thin air. In Q1 2026, the total crypto market cap dropped by about 20.4%, with Ethereum falling over 30%. After the Iran conflict, institutional capital selectively flowed back into the market—Bitcoin absorbed the majority, while Ethereum’s recovery lagged behind. Attention and capital are being redistributed, and whether ETH can maintain its status as the "second-largest crypto asset" is at the heart of this dispute.
Capital Divergence: What ETF and Futures Data Reveal
The JPMorgan report cited a set of starkly contrasting, highly informative data: after the sell-off, Bitcoin spot ETFs had recouped about two-thirds of their net outflows, while Ethereum spot ETFs had only recovered about one-third. By mid-May, cumulative net inflows for Bitcoin spot ETFs exceeded $58.6 billion, compared to about $11.83 billion for Ethereum spot ETFs. More recent data shows that in the week of May 11–15, Ethereum spot ETFs saw net outflows of $255 million, with BlackRock’s ETHA alone accounting for $185 million—clear evidence of selling pressure.
CME futures positions also show divergence: institutional investors have been much more aggressive in rebuilding Bitcoin risk exposure than Ethereum. Bitcoin positions are nearly back to pre-drop levels, while Ethereum open interest stood at about $3.606 billion as of May 15, still hovering at relatively low levels.
However, there have also been positive capital signals for Ethereum. According to Gate Research, during the week of May 4–10, Ethereum saw net inflows of over $2.6 billion, with whale accumulation and short covering briefly driving price recovery. Yet the sustainability of this inflow proved shaky in the face of large outflows the following week.
The difference in ETF capital recovery rates reveals at least two structural signals: first, institutions are reclassifying Bitcoin. Once uncertainty fades, capital tends to flow back into assets seen as "digital gold" rather than "tech growth stocks" like smart contract platforms. Second, Ethereum ETF’s sluggish recovery may be more than a short-term sentiment issue—if its core value proposition can’t deliver sustained, quantifiable revenue, institutional allocation logic will be shaken. The gap between two-thirds and one-third is no small matter.
On-Chain Activity: The Contrast Between Peaks and Reality
On-chain data paints a contradictory picture.
In February 2026, Ethereum’s daily active addresses nearly hit 2 million, surpassing the peak levels of the 2021 bull run. At the same time, daily smart contract calls exceeded 40 million, both setting all-time highs. However, these heights weren’t sustained. As of May 15, 2026, Ethereum’s on-chain transaction volume had dropped by about 1 million from its recent peak, daily active addresses were trending downward, and gas fees remained low. Staking inflows plummeted by over 80%. Meanwhile, DeFiLlama data showed that the total value locked (TVL) in Ethereum DeFi protocols was about $45.5 billion, with Ethereum’s share of the overall DeFi market declining from 63.5% at the start of 2025 to around 53% in May 2026.
The disconnect between record-high active addresses and declining network revenue points to a key question: does usage alone equate to value capture? Ethereum’s revenue model is undergoing a profound shift. Layer 2 scaling solutions continue to move transaction execution off the mainnet, and lower mainnet gas fees have directly weakened the impact of the EIP-1559 burn mechanism—less ETH is being burned, so net supply growth accelerates, putting structural pressure on the price. Data shows that Layer 2 networks’ monthly active addresses dropped from about 58.4 million in mid-2025 to around 30 million in February 2026, a nearly 50% decline. Meanwhile, mainnet active addresses doubled from about 7 million to 15 million. This user migration back to the mainnet suggests that Layer 2’s long-term appeal as a scaling tool is waning, but low mainnet fees alone can’t recreate effective deflationary pressure for ETH.
The Inflation Narrative: Burn Mechanism Breakdown and Supply-Side Contradictions
One of the most overlooked yet critical points in the JPMorgan report centers on Ethereum’s supply dynamics.
Over the past three years, technical upgrades have primarily focused on lowering Layer 2 transaction costs. This succeeded in expanding the ecosystem, but at the cost of sharply reduced mainnet fees. Under EIP-1559, a portion of network fees is permanently burned—lower fees mean less ETH is burned, causing net supply growth to rise. In other words, Ethereum is quietly shifting from a "deflationary asset" toward mild inflation.
Two major upgrades slated for 2026—Glamsterdam and Hegota—will reinforce this trend. Glamsterdam, expected to go live in Q3, will raise the block gas limit from 60 million to 200 million (a 233% increase) and introduce ePBS (in-protocol proposer-builder separation) and parallel transaction execution, targeting network throughput of 10,000 TPS. Hegota, scheduled for later in the year, will introduce Verkle Trees, reducing node storage requirements by about 90%. The core question from analysts: while these scaling upgrades will significantly boost performance, can they generate enough new demand and network activity to offset the inflationary pressure caused by a weaker burn mechanism?
The "ultrasound money" narrative has been one of ETH’s most important valuation pillars over the past four years. When the burn rate systematically declines due to scaling upgrades, this narrative’s foundation is shaken. But a challenged narrative isn’t the same as a dead one. If Glamsterdam’s parallel transaction processing can attract enough new applications and transaction activity back to the mainnet, total fee revenue could still rise—even if per-transaction fees are lower, aggregate volume could compensate. The catch: this is a hypothesis, not a certainty.
Tom Lee’s $62,000 Thesis: Projection, Not Prediction
Tom Lee’s $62,000 target for ETH deserves a closer look.
This figure isn’t a hype-driven call—it’s based on the assumption that the ETH/BTC ratio reaches 0.25. If Ethereum becomes the core layer of global payment infrastructure, its market cap could reach a quarter of Bitcoin’s. For more pragmatic scenarios: if the ratio returns to the eight-year historical average of about 0.0479, ETH would be priced around $12,000; if it returns to the 2021 bull market peak of about 0.0873, the price would be about $22,000. On the technical side, Lee believes that if ETH closes above $2,100 in May, it will break out of a five-year consolidation range, signaling the end of a prolonged market slump.
It’s important to note that Lee’s affiliated company, Bitmine Immersion, is building a large-scale Ethereum corporate treasury and currently holds about 5.18 million ETH, roughly 4.29% of total circulating supply, with a goal to increase this to 5% by 2026. This means his ultra-bullish stance is directly tied to vested interests.
From a narrative perspective, each of Lee’s targets is fundamentally conditional. "If" the ratio returns to the average, to the peak, or to the historic extreme of 0.25, then the corresponding price will materialize. "If" the May closing price breaks $2,100, the bull market signal is confirmed. These are not predictions, but conditional projections. Ultimately, the market price is the only true test. As of May 18, ETH was trading at about $2,121.01—just touching, but not yet firmly establishing itself above, that much-anticipated technical threshold.
Can Technical Upgrades Be a Turning Point?
Ethereum completed two major protocol upgrades in 2025: Pectra (activated May 7) introduced EIP-7702, allowing externally owned accounts to temporarily execute smart contract code, enabling batch transactions and gas fee sponsorship; Fusaka (activated December 3) rolled out the PeerDAS system, which greatly increased data capacity through sampling validation and raised the default block gas limit to 60 million.
JPMorgan’s analysis reveals a harsh historical truth: over the past three years, Ethereum’s technical upgrades haven’t led to qualitative growth in on-chain activity. After Pectra and Fusaka went live, ETH network revenue didn’t structurally improve, and the ETH/BTC ratio continued to decline. But this doesn’t mean future upgrades are doomed to fail. The key difference with Glamsterdam is scale—a 233% increase in the gas limit could enable applications that were previously impossible due to performance constraints. The real question is whether developers will choose to deploy those applications on Ethereum, which depends on cost, user experience, ecosystem support, and more—not just L1 throughput.
Conclusion
The divide between JPMorgan and Tom Lee isn’t simply a matter of being bullish or bearish on ETH price—it’s a clash of two investment logics.
JPMorgan anchors its analysis in actual capital flows, network revenue, and relative performance, following a traditional finance paradigm: interpreting what’s happening now, not predicting future turning points. Tom Lee, on the other hand, anchors his analysis in ratio mean reversion, historical cycles, and structural transformation—a paradigm closer to early crypto believers: betting on value re-rating after technological leaps, prioritizing narrative imagination over current data.
For market participants, the key isn’t to judge which side is "right"—since the truth likely lies somewhere in between—but to understand the core dilemma ETH now faces: Ethereum boasts record-high active addresses and network effects, but its value capture mechanism is undergoing a structural shift. The upcoming technical upgrades offer potential breakthroughs, but until then, the market won’t price them in advance.
As of May 18, 2026, according to Gate market data, ETH was priced at $2,121.01, down 2.42% in the past 24 hours and 1.55% over the past year. The numbers themselves say it all: the market hasn’t validated the bears’ verdict or priced in the bulls’ prophecy. It’s still waiting for real, on-chain evidence that will truly change the game.
