Will Canny is CoinDesk's finance reporter.

Ethereum’s dominance in non-fungible tokens (NFTs) is shrinking because of congestion and high gas fees, JPMorgan said in an analyst report.

The network’s market share of NFTs has dropped to around 80% from about 95% at the start of 2021, analysts led by Nikolaos Panigirtzoglou wrote in the note published last week.

Since August, the Solana blockchain has been capturing the most NFT volume share at the expense of Ethereum, the bank said, noting that was when the NFT market started a major expansion. Ethereum has also been losing market cap share to Solana in line with the declining NFT volume share.

Because NFTs are the “fastest growing universe in the crypto ecosystem,” Ethereum’s share of this market is likely to be more important than its share of decentralized finance (DeFi), according to the note. Earlier in the month, the bank warned that Ethereum’s dominance of DeFi was also at risk as the scaling of the network needed to maintain its dominance could arrive too late.

JPMorgan cautions that if Ethereum’s loss of NFT market share continues in 2022, it could be a bigger problem for its valuation.

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Will Canny is CoinDesk's finance reporter.

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Will Canny is CoinDesk's finance reporter.