Ethereum (ETH 0.09%) is winning again. The world's second-most-valuable cryptocurrency has soared 33% over the past month, and it's approaching a three-month high. Digital currencies in general had a strong March, but Ethereum is one that should continue leading the way in the month ahead.
The popular crypto has been a market fave since it planted the flag on smart contracts and other ways to make decentralized finance shine on top of its blockchain technology. With a significant event now just a couple of months away and Ethereum's shortcomings becoming less of a deal breaker, let's dive into why this is my top cryptocurrency to buy in April.
The stakes are high
The bearish case on Ethereum is fairly well established at this point. Despite being the dominant crypto in the realm of decentralized finance -- accounting for 55% of the total value locked across all denominations -- Ethereum is far from efficient. It's a laggard in terms of speed, the number of concurrent transactions that can take place, and (perhaps more importantly) the costs related to actually mining and ultimately using Ethereum. Gas fees can border on the outrageous for even the smallest of exchanges.
The good news is that there's no shortage of other cryptocurrencies that work with Ethereum instead of against it to make it more efficient. We're also now potentially two months away from Ethereum completing its shift to proof of stake, a move that will do more than just ease environmentalist concerns about the resources-hogging nature of its current proof-of-work approach. The migration to Ethereum 2.0 won't make it perfect, but it will make it better on most fronts.
It's been a slow transition, but we're getting close. Developers successfully completed the last public test of merging the blockchain's proof-of-work and proof-of-stake chains. The June target might actually stick this time. "Sell on the news" is a mantra that sometimes burns investors with a sell-off when expected good news materializes. But with so many people still skeptical about Ethereum completing a smooth transition to proof of stake this summer, it could drive the crypto higher.
Completing the shift could also smoke out even more institutional support, and even a few risk-tolerant income investors. In a climate of low interest rates, staking crypto has been a way for buy-and-hold investors to generate some passive income from their digital currencies. The migration to proof of stake finds some traders holding out for staking yields in the range of 7% to 15% annually, according to a recent CoinDesk article.
With a market cap of $424 billion, five times larger than the bronze medalist, one can argue that Ethereum is already too big to be the top crypto idea to buy this month. I disagree. There might be smaller denominations picking up speed, but most blockchain roads go through Ethereum to a certain extent. It will continue to be a leader.
Any positive announcements this month suggesting that Ethereum is on track to full staking by June could help build on the crypto's already bullish momentum. Inflation isn't going away anytime soon, and the case for investing in the world's second-largest cryptocurrency denomination is only getting louder.