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One of the United States’ leading financial institutions has outlined the weaknesses of ether (ETH) when compared to other competing cryptocurrencies.

ETH v BTC

Morgan Stanley Wealth Management observed, in a note entitled Cryptocurrency 201: What Is Ethereum?, that ether, the world’s second largest cryptocurrency by market capitalisation and a leader in the growth of decentralised finance (DeFi), is itself less decentralised than bitcoin.

The firm observed that, while the top 100 addresses holding bitcoin owned 14% of the cryptocurrency’s total supply, the equivalent figure for ethereum stood at 39%.

The group of analysts led by Denny Galindo also stated that, since 2018, ether has been around 31% more volatile than its larger competitor.

Competition and regulation

Morgan Stanley recognised that the Ethereum blockchain’s structure makes it far better placed than bitcoin to power the ongoing surge in interest in DeFi and non-fungible tokens (NFTs). However, it also highlighted the threat of such projects eventually migrating to alternatives such as Solana, Cardano, Tezos and BNB Chain.

It observed that high fees, a criticism long levelled at Ethereum, could hasten this shift and hinder scalability and further adoption.

In addition to competition, Morgan Stanley’s note also considered the threat to future growth posed by regulatory crackdowns. The world’s fourth-largest investment bank particularly stressed the fast-changing nature of laws governing this burgeoning sector.

A shortage of storage?

Morgan Stanley did recognise that ether’s growth was noticeably faster than bitcoin’s. Indeed, from the start of 2021 to mid-February 2022, the former has risen by 275% while the latter has only increased by 35%.