Morgan Stanley’s wealth management global office for investment has published a report about Ethereum (ETH). It argues that blockchain’s dominance may be reduced if there is strong market competition.
The report by the investment banking giant is called “Cryptocurrency201: What Is Ethereum?”. It provides a comprehensive overview of the ecosystem and its advantages and limitations in relation to Bitcoin (BTC).
“Due to its larger addressable market, Ethereum faces greater competitive threats, scaling issues and complexity challenges than Bitcoin. The report also states that Ether is volatile than Bitcoin.
Morgan Stanley argued that Ethereum could lose its smart contract superiority in favor of cheaper and more efficient blockchains. This is something that supporters of the Ethereum killer Market, which includes networks like Polkadot and Tezos (XTZ), have often argued.
“Ethereum is facing more competition in smart contract markets than Bitcoin in the store-of value market.” Ethereum could lose market share in smart contract platforms to cheaper or faster alternatives.
According to the investment bank, Ethereum is more risky than Bitcoin because it faces greater competition in smart contracts than Bitcoin in the store-of value market.
“Bitcoin can be used in a way similar to a savings account, with fewer transactions per user. Transactions are more closely tied to Ethereum demand. According to the report, scaling restrictions similar to those that affect Bitcoin demand are more detrimental than they are for Ethereum demand.”
Another concern was the changing regulatory status of Ethereum-based applications, such as Decentralized Fin (DeFi), and nonfungible tokens(NFTs), which could lead to a reduction in demand for Ethereum transactions.
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The centralization of Ethereum was also mentioned, with the report noting the fact that the majority of Ether’s supply is held in a “relatively few accounts”.
It is less centralized than Bitcoin. The top 100 addresses hold 39% of Ether. This compares to 14% in Bitcoin.
The Morgan Stanley report, which was bullish on the Ethereum side, stated that Ethereum has greater market potential and Bitcoin has deflationary characteristics via its transaction-based burn mechanism. Its performance will improve significantly after the transition to a proof of stake consensus mechanism.
“Ethereum is a larger market than Bitcoin. It can be worth more than Bitcoin which is just the market for store-of-value products such as gold and savings accounts.