Morgan Stanley Issues Ethereum Warning, Says ETH May Lose Market Share to Faster or Cheaper Challengers

An analyst from banking titan Morgan Stanley says that leading altcoin Ethereum (ETH) could see its market share dwindle as investors turn to cheaper and faster competitors.

In a new report, investment strategist Denny Galindo details the bear case for the top smart contract platform, saying that it could face future regulations, stiff competition from the likes of its challengers, in addition to scalability issues.

“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.”

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Prominent Ethereum alternatives include Avalanche (AVAX), Solana (SOL), Cardano (ADA), Terra (LUNA), Polkadot (DOT), and Algorand (ALGO).

Galindo adds that the second largest crypto asset by market cap may have scalability issues due to on-chain congestion and its high transaction fees. He says that ETH could eventually outpace its own resources if it does not upgrade.

“The second major Ethereum-specific risk is blockchain bloat and scalability. Blockchains are fundamentally expensive technologies because they have built-in redundancy.

In order to be a global smart contract platform, Ethereum needs to store a very large amount of data (primarily variables for each smart contract), and it needs to be faster and less expensive to use per transaction than potential alternatives…

Over time, Ethereum’s storage demand, unless changed, will likely outstrip its resources.”

The analyst also brings up how upcoming regulations could directly impact Ethereum’s decentralized finance (DeFi) and non-fungible token (NFT) markets.

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“The changing regulatory landscape poses another big risk. Much of the activity on Ethereum is in DeFi and NFTs – two areas with rapidly evolving regulations. Regulations that restrict or eliminate certain market segments, such as finance, from using Ethereum could reduce demand for Ethereum transactions.”

Ethereum is exchanging hands at $2,654 at time of writing, down 6.31% in the last 24 hours.

You can read the full report here.


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