Ethereum snubs bearish Morgan Stanley report as ETH holds strong above $2.5K

Ethereum, Ethereum snubs bearish Morgan Stanley report as ETH holds strong above $2.5K
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Key Ether Takeaways:

  • Ethereum (ETH) attempted to recover alongside Bitcoin.
  • The weekly chart showed conflicting indicators.
  • Investment titan Morgan Stanley published a bearish report on Ethereum, citing the rising competition, and the network’s congestion issues.

YEREVAN (CoinChapter.com) – Ether (ETH) recovered alongside Bitcoin (BTC) at the beginning of its new weekly session, reaching over $2,730 even as Morgan Stanley rubbished its parent platform, Ethereum, for its shortcomings as a smart contract protocol.

Ethereum price action. Source: CoinMarketCap.com
Ethereum price action. Source: CoinMarketCap.com

Ethereum daily chart doubles Bitcoin

In detail, Ether’s price trends have been duplicating Bitcoin since Q4 2021. The daily chart below illustrates the correlation as both paint a bearish formation dubbed the “Double Top.” The latter occurs when the price action reaches a certain level two consecutive times, with a moderate dip in between.

Also read: Ethereum investment products break inflow dry spell after 9-weeks.

The pattern predicts a decline once the second top is formed, and both assets follow suit.

Ethereum daily chart copied Bitcoin. Source: ETHUSDT on TradingView.com
ETH/USDT daily chart copied Bitcoin. Source: TradingView.com

Moreover, Monday’s recovery attempt complied with another more prominent pattern after zooming out to the weekly chart.

ETH weekly technicals

In contrast with the predominantly bearish daily chart, the weekly price action formed a neutral Ascending Channel that could take the token up roughly 90% if its relevance prevails. In detail, the latest ETH bounce also constituted a retest of the Channel’s support. The latter has been instrumental since Jan. 2021.

Ethereum (ETH) weekly chart featuring an Ascending Channel. Source: TradingView.com
Ethereum (ETH) weekly chart featuring an Ascending Channel. Source: TradingView.com

In detail, the Ascending Channel features two parallel trendlines that envelop the price swing and prevent sharp breaks in either direction while driving the price up. Notably, the formation does not predict a particular bias after the break occurs.

However, the Channel has been instrumental for determining short-term bias as long as it retains relevance.

As of Feb. 21, after retesting the said support, ETH could be on its way to reaching over $5,000 by Q2 2022. Additionally, the Ascending Channel has a relevant mid-range that could either provide more assistance or halt the rally at some point.

Also read: Art101.io releases final details for NFT based on Ethereum's creator – BASED VITALIK.

However, as the price action printed higher highs throughout 2021, the token’s relative strength index (RSI; purple graph at the bottom) registered lower lows. The occurrence is dubbed a Bearish RSI Divergence.

The latter means that the traders might not expect high returns from the ETH soon. Thus, they are likely to short the asset and initiate a sell-off wave, lowering the price.

While the alpha altcoin flashed conflicting technicals, predictions from banking giant Morgan Stanley take the bearish side, citing fierce competition.

Morgan Stanley report

Denny Galindo, one of the analysts at Morgan Stanley, published a report predicting a decline in Ethereum’s market share because of rising competition.

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.

read the report.

The analyst also noted that Ethereum Network experiences various scalability and congestion issues that don’t plague its competitors, such as Solana (SOL), Polkadot (DOT), or Avalanche (AVAX).

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.

said Mr. Galindo.
Also read: AVAX explodes 27% in three days as Avalanche gains another road to Ethereum.

Indeed, while the ETH price peaked at almost $4,900 in Nov. 2021, and the total value locked (TVL) reached $164 billion, Ethereum’s market share declined against the competition. In Jan. 2021, the second-largest digital asset took up 97% of the DeFi market. However, that number has dropped to 58% in Feb. 2022.

Ethereum's market share has been declining. Source: DeFillama.com
Ethereum’s market share has been declining. Source: DeFillama.com

Despite citing the harsh rivalry, the report stated that Ethereum Network could overcome the difficulties.

Today, Ethereum clearly has a dominant market share leads in value, liquidity, and number of developers and users, but its shares could decrease over time. Network effects—the tendency for networks to become more valuable as more participants join them—constitute a wide moat for Ethereum, but even wide moats are sometimes overcome.

stated Mr. Galindo.
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Ethereum, Ethereum snubs bearish Morgan Stanley report as ETH holds strong above $2.5K

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