Report From Morgan Stanley Predicts Tough Times for Ethereum

The world of cryptocurrency is a pretty unpredictable and volatile one. There are digital assets and currencies that are launched every day. Some of them become really popular altcoins and then there are others that don’t see the light that they were meant to.

Gone are the days when there were just two players in the crypto market: bitcoin and Ethereum. Now, there are competitors for both these cryptocurrencies and according to a recent report provided by Morgan Stanley, Ethereum might be in trouble due to the rising competition.

In the latest news on crypto today, a report from Morgan Stanley has made a prediction about the fate of Ethereum due to the rise in the competition that is taking place in the entire market of cryptocurrency.

Ethereum was once considered to be one of the most popular cryptocurrencies for sure. However, with the emergence of new and more amazing options of crypto, the dominance that has been set by Ethereum might be dwindled for sure.

Yes, the wealth management office of global investment company Morgan Stanley has definitely made this particular prediction about the popular cryptocurrency and some of it might be true for sure. The company argues that the dominance of Ethereum could have dwindled with the emergence of strong competition in the market.

“Ethereum demand is tied more closely to transactions. Therefore, similar scaling constraints hurt Ethereum demand more than they suppress Bitcoin demand,” Morgan Stanley’s report reads.

The investment banking company’s report has the title “Cryptocurrency 201: What Is Ethereum?” and it gives a thorough description of the entire environment of Ethereum along with the pros and cons of the cryptocurrency-related to Bitcoin or BTC.

“Due in part to its more ambitious addressable market, Ethereum faces more competitive threats, scalability issues, and complexity challenges than Bitcoin. Furthermore, Ether is more volatile than Bitcoin,” according to the report.

Morgan Stanley made an argument that Ethereum may lose smart contract superiority to cheaper and faster blockchains — something that has often been argued by supporters of the Ethereum killer market that includes networks such as Cardano (ADA), Solana (SOL), Polkadot (DOT), and Tezos (XTZ): “Ethereum faces more competition in the smart contract market than Bitcoin faces in the store-of-value market. Ethereum may lose smart contract platform market share to faster or cheaper alternatives.”

The investment bank also suggested that Ethereum poses a greater investment risk than Bitcoin as it faces greater competition in the smart contract market than “Bitcoin faces in the store-of-value market.”

“Fewer transactions per user are needed to ‘use’ Bitcoin, which is akin to a decentralized savings account. Ethereum demand is tied more closely to transactions. Therefore, similar scaling constraints hurt Ethereum demand more than they suppress Bitcoin demand,” the report mentioned.

Other concerns raised about the network included the evolving regulatory status of applications built on Ethereum such as Decentralized Finance (DeFi) and nonfungible tokens (NFTs) which may see strict regulations placed on them in the future, resulting in reduced demand for Ethereum transactions.

While the centralization of Ethereum was also highlighted, with the report noting that most of Ether’s supply is held by a “relatively small number of accounts”: “It is less decentralized than Bitcoin, with the top 100 addresses holding 39% of Ether, which compares to 14% for Bitcoin.”

On the bullish side of the equation, the Morgan Stanley report argued that Ethereum has greater market potential than Bitcoin, it has deflationary traits via its transaction-based burning mechanism, and its performance will significantly improve following the eventual transition to a proof-of-stake consensus mechanism: “Ethereum has a much bigger addressable market than Bitcoin and can therefore be worth more than Bitcoin, which is simply the market for a store of value products like savings accounts and gold.”