JPMorgan: Ethereum may continue to face “intense competition” from other networks
Morgan Stanley analysts say that Ethereum may continue to face "fierce competition" from rival blockchain networks. The analysts state that Ethereum's share of the total cryptocurrency market value has dropped to its lowest level in four years, highlighting increasing pressure from competitors.
The analysts point out two main reasons for Ethereum's poor performance: increasing competition from blockchain networks such as Solana and Layer 2, which offer lower fees and higher scalability, and a lack of a strong narrative compared to Bitcoin as a store of value. Even after the introduction of blob in Ethereum's London upgrade to reduce fees and increase scalability, activity is increasingly migrating from Ethereum's main network to Layer 2 networks, weakening the underlying chain.
Intensifying competition is also prompting top decentralized applications to migrate to their own application-specific chains for better performance and lower costs. The analysts state that Uniswap, dYdX, and Hyperliquid have all taken this step, and Uniswap's move to Unichain is particularly significant. The analysts state that as one of Ethereum's largest gas consumers, Uniswap's exit could reduce Ethereum's fee revenue and increase the risk of network inflation, as a decrease in transaction volume means a decrease in token consumption.
The analysts state that despite these challenges, Ethereum still holds a leading position in stablecoins, DeFi, and tokenization, but its ability to maintain this dominance remains to be seen.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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