Cryptocurrencies may look like scary territory today. The world's largest players -- Bitcoin and Ethereum (ETH +3.31%) -- both have dropped more than 20% since the start of the year. Inflation worries, the war in Ukraine, and uncertainties about regulation of the crypto industry have pushed some investors toward lower-risk assets.
Here's something important to remember though: These factors are weighing on the industry now. But they don't change the prospects of each individual player. For example, a blockchain that's attracting more and more projects now may flourish down the road. And today represents an opportunity to get in on the action at a good price. Of course, especially during these difficult times, it's best to be selective. And that's why the following player is my top cryptocurrency to buy right now...
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Buying a leader when it's down
I'm talking about Ethereum. What better time to buy a market leader than when it's down? Ethereum hasn't escaped the negative feeling looming over the crypto market. But there's actually reason to be very excited about Ethereum right now. That's because the blockchain is in the middle of a significant upgrade.
The upgrade is happening in stages. Ethereum already launched the first part, known as "the Beacon chain." This is the first step of switching Ethereum from a proof-of-work to a proof-of-stake consensus mechanism. Proof of work involves validators solving complex computations to OK a transaction. Proof of stake gives validation power to those according to their Ethereum holdings. This is faster -- and greener because it uses less energy.
The next step will be merging this proof-of-stake chain with the main net. That's when Ethereum will actually make the transition to proof of stake. This was recently delayed -- but should take place in the third or fourth quarter of this year. And next year, Ethereum plans on introducing shard chains. These split up the load of work across new chains.
Here's why all of this is so important. This upgrade tackles the big problem that's weighed on Ethereum: congestion on the network that's led to slow transaction times and high transaction fees.
CRYPTO: ETH
Key Data Points
A leader in dApps and NFTs
In spite of this problem, Ethereum is already a top player. Ethereum is home to more than 2,900 decentralized applications (dApps) according to State of the dApps website. And it's the leading blockchain for non-fungible token (NFT) sales by volume, CryptoSlam data shows. A report by Electric Capital, a firm that invests in blockchain technology, also shows the strength of Ethereum. Ethereum grew its number of developers by 42% last year. And Ethereum remains the biggest player when it comes to tools, apps, and protocols.
Ethereum has the first-mover advantage. With the upgrade, growth could truly take off over the coming years. Of course, all cryptocurrencies remain high risk. That's because the industry is new, and it's not yet clear if the world will adopt it in a big way. Never invest more than you can afford to lose. But, if you're looking to give crypto a try, investing in this market leader is a great start.
