Private blockchains, not large holder sell-offs, represent the greater long-term risk for Bitcoin and Ethereum, according to MEXC Ventures research. The analysis warns that institutional finance is gravitating toward permissioned networks for settlement, tokenization, and payments, potentially sidelining public blockchains.
Sell-offs are secondary
Market volatility often centers on the possibility of large holders selling, such as Strategy, which holds about 4% of all Bitcoin. JPMorgan analysts, however, view these events as secondary issues. While a sell-off could create temporary price pressure, it does not threaten the core value proposition of Bitcoin's ecosystem.
The real shift: permissioned networks
The more fundamental risk is the migration of tokenization, settlement, and payment infrastructure to private, permissioned blockchains. JPMorgan notes that even if institutions adopt blockchain technology, they do not necessarily need public networks like Bitcoin or Ethereum. Instead, regulated entities favor permissioned systems for KYC, privacy, liability, and compliance reasons. JPMorgan's own platform, Kinexys, has processed over $4 trillion in transactions, illustrating this trend. The Bank for International Settlements also opposes using public blockchains for systemically important financial infrastructure, backing permissioned ledgers instead. SWIFT's initiatives, the digital euro, and China's digital yuan follow a similar path.
Tokenized deposits and RWA crossroads
Tokenized deposits—bank deposits issued as blockchain tokens within existing regulatory frameworks—could replace stablecoins in institutional settlement. If widely adopted, this would directly impact public blockchain-based payment ecosystems. The real-world asset tokenization market, currently about $50 billion, is mostly built on Ethereum, but as institutional demand grows, issuance, custody, and settlement may shift to private infrastructure offering better confidentiality and governance. The U.S. DTCC is already developing a permissioned tokenization workflow, while Securitize has issued tokenized assets on Solana and Avalanche.
Regulatory clarity could backfire
The CLARITY Act, often seen as a boon for public blockchains, might paradoxically accelerate tokenized deposit issuance by banks. JPMorgan warns that reduced regulatory uncertainty could encourage institutions to build their own digital deposit infrastructure, intensifying competition rather than strengthening public chains. The assumption that institutional adoption equals public blockchain success needs reexamination.
Coexistence possible but uncertain
Public blockchains are not necessarily doomed. JPMorgan outlines scenarios where they could survive: as complementary rather than competing networks, as a foundation for regulated stablecoins, or as a store of value—Bitcoin's 'digital gold' positioning may shield it from some structural threats. Ultimately, the key distinction is between short-term price shocks and long-term structural change. The real risk is that institutional blockchain adoption bypasses public networks, narrowing the use cases for Bitcoin and Ethereum. The future hinges on which chains institutions choose for tokenized assets and how tokenized deposits compete with stablecoins in settlement markets.