An analyst from banking giant Morgan Stanley says that Ethereum (ETH) could ultimately have a larger market than Bitcoin (BTC).
According to a report seen by Barron’s, Morgan Stanley strategist Denny Galindo argues that Ethereum is distinguishable enough from other crypto assets that it can be considered as separate investment from Bitcoin.
Barron’s says the report highlights how Ethereum, not Bitcoin, is now associated with more economic activities than just payments or store of value, including non-fungible tokens (NFTs) and decentralized applications (DApps). According to Galindo, Ethereum’s various use cases could ultimately make ETH’s market larger than Bitcoin’s.
“In reflecting on the question, ‘Can Ethereum fit in a portfolio,’ Galindo simply itemizes the cases for and against. Ethereum, by making a big market for DApps, has more potential utility, and therefore a potentially bigger market, than Bitcoin.”
Galindo’s report also says that Ethereum may be integrating with traditional financial markets, noting how ETH’s correlation with the stock market is nearly double that of BTC.
“While Ethereum and Bitcoin have had a 0.70 correlation to one another since December 2018, Ethereum has been nearly twice as correlated to the S&P 500, at 0.26, versus 0.14 for Bitcoin… If these correlations hold, replacing some Bitcoin exposure with Ether might actually make a portfolio more correlated to equities.”
A value closer to 1 suggests that the two assets are tightly correlated.
Galindo also says in his report that he believes crypto is here to stay.
“We make no recommendation whether to buy or sell Ether… We do not see this asset class disappearing… The faster we can get educated, the faster we can understand how cryptocurrency may fit into some, though not all, portfolios.”
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