Ethereum blockchain’s dominance could flutter and wane if strong market competition emerges, says Morgan Stanley’s report “Cryptocurrency 201: What Is Ethereum?” It highlighted that Ethereum faces more competitive threats and complex challenges as well as scalability issues than Bitcoin. The report underlines Ether to be more volatile than BTC.
Morgan Stanley believes Ethereum may lose smart contract superiority to cheaper and faster blockchains. Analysts have argued the same saying that Ethereum could fizzle out because of Solana, Cardano, Polkadot and Tezos. These networks are said to be faster and cheaper compared to Ethereum.
The report said Ethereum poses a greater investment risk than Bitcoin because it faces greater competition in the smart contract market than the latter in the store-of-value market. It said that fewer transactions per user are needed to use BTC. Ethereum’s demand is linked more closely to transactions. Similar scaling constraints affect Ethereum demand more than Bitcoin.
Moreover, the report highlighted the evolving regulatory status of applications built on Ethereum such as NFTs and DeFi. These blockchain products will have strict regulations in place on them in the near future. This means reduced demand for Ethereum transactions. Comparing it again to the world’s most popular cryptocurrency, the report said Ethereum is less decentralized. It pointed out that the top 100 addresses hold 39% of Ether compared to 14% for Bitcoin.
However, Morgan Stanley stressed that Ethereum has greater market potential than Bitcoin. Ethereum has deflationary traits via its transaction-based burning mechanism. Its performance will improve significantly after the transition to a proof-of-stake consensus mechanism.
The report highlighted Ethereum having a bigger addressable market than Bitcoin. And it can be worth more than Bitcoin. It noted Ethereum’s market dominance in terms of value, liquidity, number of developers and users and said shares are likely to decrease over time.