Morgan Stanley’s wealth management global investment office has published a report on Ethereum (ETH) arguing that the blockchain’s dominance could dwindle if strong market competition emerges.

The investment banking giant’s report is titled “Cryptocurrency 201: What Is Ethereum?” and it provides a detailed rundown of the ecosystem along with its advantages and disadvantages in relation to Bitcoin (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,” the report reads.

Morgan Stanley argued 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):

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 read.

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.

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