Ethereum Likely to Lose Its Dominance to Competitors

Post author By Cedric McMahon
Post date February 18, 2022
14 Comments on Ethereum Likely to Lose Its Dominance to Competitors

Morgan Stanley recently published a report titled Cryptocurrency 201 – What Is Ethereum?. Its wealth management global investment office has put forward some arguments which prove that Ethereum is at the risk of losing its dominance in the market.

The report presents a rundown of Ethereum’s features, market, and competition. It highlights the ecosystem’s advantages and disadvantages while arguing how Bitcoin is in a better condition.

Ethereum At Risk Of Losing Its Dominance

Many traders feel Ethereum has a bigger market potential than Bitcoin because of its transaction-based burning process, which has deflationary characteristics. However, a report published by Morgan Stanley suggests otherwise.

It argues that the dominance of Ethereum is at risk, and the platform may lose its spot if competition emerges. The price of Ethereum has fallen by 7.14% in the past seven days. The price declined by 6.41% in the last 24 hours. Find more details here about the future of ETH and whether it will reach Bitcoin’s status.

The demand for Ethereum is currently tied to its transitions. This poses several scaling constraints that hurt the demand of Ethereum. Competition emerging in the market will give users more options, leading to an inevitable switch.

The volatility of Ethereum is also a concern that Morgan Stanley has highlighted in its report. It has been observed that Ethereum is more volatile as compared to Bitcoin. Market factors tend to have more severe effects on Ethereum than on Bitcoin.

Other issues highlighted in the report are related to scalability, competitive threats, and complexity challenges.

Ethereum is expected to lose its ground in the smart contracts industry as well, with the rise of the upcoming competitors that include Cardano, Polkadot, Solano, and Tezos.

The competitors may prove to be quicker and more economical compared to Ethereum.

Morgan Stanley’s report also highlights that Ethereum poses a larger risk of investment as compared to Bitcoin.

While only a few transactions are needed to use Bitcoin, the demand of Ethereum is completely tied to its transactions. Bitcoin’s concept is similar to that of a decentralized savings account.

Also, Ethereum’s Smart Contract market is at higher risk than Bitcoin’s store-of-value market.

Other fears highlighted regarding the network included the changing regulatory status of Ethereum-based apps like Decentralized Finance (DeFi) and NFTs, which may be subject to tighter laws in the future, resulting in lower demand for Ethereum transactions.

In terms of supply holdings, only the top 100 addresses hold 39% of Ether as compared to the 10% for Bitcoin. This further puts Ethereum’s market dominance at stake.

Morgan Stanley further highlighted that with the ultimate shift to a proof-of-stake consensus method, Ethereum’s performance could greatly improve:

According to the paper, Ethereum has a considerably larger addressable market than Bitcoin and so could potentially be of a higher value than Bitcoin, which is merely the market for a store of valuable items such as savings accounts and gold.