The cryptocurrency market is notoriously volatile and speculative. But over the long term, it has proven to be a reliable asset class -- posting a 350% gain since 2015 (for a market cap of $2.4 trillion). Investors should focus on coins with top brands and technical advantages to tap into this opportunity.
Let's explore the reasons Ethereum (ETH 1.02%)and Avalanche (AVAX 0.65%) fit the bill and can provide a long-term boost to your portfolio.
1. Avalanche
Launched in 2020, Avalanche doesn't enjoy the early mover advantages of Ethereum, but it makes up for this through technical innovations. The programable blockchain has soared over 2,000% since inception. And it can maintain a healthy growth rate by leveraging its transaction speed and inbuilt scarcity to attract development and investors.
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Unlike Ethereum, which uses a cumbersome proof-of-work (PoW) system where miners solve puzzles to validate transactions, Avalanche uses proof-of-stake (PoS). Its miners update the blockchain using coins they own, giving it a capacity of 4,500 transactions per second compared to Ethereum's 15.
Avalanche is also naturally deflationary because transaction fees are sent to an inaccessible address and removed from circulation in a process called "burning."
As more people use the avalanche platform, demand for its native token AVAX will increase while the supply of tokens decreases. This system could help sustain long-term price growth for the asset, which is good news for investors. So far Avalanche has burned over 500,000 units of AVAX, worth $45 million.
2. Ethereum
In the largely unregulated blockchain economy, trust and brand recognition are everything. And despite not being as ubiquitous as its counterpart Bitcoin, Ethereum has both in spades. The platform's first-mover advantage and ability to upgrade itself to meet market needs set it up for a sustainable edge over rivals.
While other blockchains have surpassed Ethereum's transaction capacity of 15 per second, it remains an attractive platform for decentralized application (dApp) development (with over 3,000 projects). That's because it is the first blockchain optimized for these complex self-executing programs and boasts an active development team.
On Dec. 6, Ethereum released its latest upgrade, "Arrow Glacier,' designed to give its developers more time to switch to a proof-of-stake consensus mechanism, which will be the cornerstone of a wide-ranging update called Eth 2.0.
Ethereum's founder Vitalik Buterin believes Eth 2.0 could send the platform's transaction capacity as high as 100,000 per second. And this goal depends on an innovative technique called sharding, which will split its network's load across 64 new chains. It is unclear when the full Eth 2.0 upgrade will go live. But according to Ethereum.org, shard chains could arrive in 2023.
Which crypto is right for you?
Ethereum and Avalanche are both great choices for investors looking for a cryptocurrency with a long-term edge. But they do serve different investment strategies. Ethereum is better for those who want to bet on the stability and name recognition of a blue chip cryptocurrency, while Avalanche is less proven but could experience more explosive growth because of its smaller size and in-built scarcity mechanism.
