Ethereum’s (CRYPTO: ETH) dominance may get eroded as more competitors appear on the horizon, as per a report from the Wealth Management Global Investment Office of Morgan Stanley.
What Happened: The report titled “Cryptocurrency 201: What Is Ethereum?” was authored by Morgan Stanley Investment Strategist Denny Galindo and associate James Ferraioli.
The report looked at Ethereum and how it differs from Bitcoin (CRYPTO: BTC) — the apex coin. It also spanned Ethereum’s use cases like decentralized finance or DeFi and non fungible tokens or NFTs.
Laying down the bear case for Ethereum, the Morgan Stanley analysts said, “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.”
See Also: How To Buy Ethereum (ETH)
Why It Matters: Over the last few years, more so-called Ethereum-killers or alternatives have come into prominence. These include coins and projects such as Avalanche (AVAX), Cardano (ADA), and Polkadot (DOT).
Pointing to the fact that it has a more “ambitious addressable market,” the analysts from Morgan Stanley wrote, “Ethereum faces more competitive threats, scalability issues and complexity challenges than Bitcoin. Furthermore, Ether is more volatile than Bitcoin.”
On scalability, the Morgan Stanley researchers said that 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, as Bitcoin users do not need many transactions,” as per the report.
The researchers also pointed to an evolving regulatory landscape as it pertains to Ethereum and how applications such as DeFi could conflict with existing laws.
“If regulation or legislation reduces demand for these transactions, demand for Ether could drop,” the report said.
Notably, Ethereum developers shrugged away a previous warning from JPMorgan that the network may not scale up fast enough to ward off competition.
