Cryptocurrencies have been tumbling over the last six months. Many investors are losing patience with digital assets, which still lack a legal and regulatory framework. In addition, those who expected crypto coins to provide a safe haven in times of rising inflation rates have been disappointed, and even some so-called stablecoins have been unstable recently.
At the same time, most of the major cryptocurrencies kept working as designed while their development teams pushed them toward a brighter future. There are many reasons to believe in a market where cryptocurrencies and blockchain networks will have disrupted traditional systems such as banking, payments, and data management. In that world, you should make sure that your investment portfolio has some exposure to Ethereum (ETH +4.90%).
The leading platform for smart contracts and decentralized computing is a no-brainer buy today. Here's why.
CRYPTO: ETH
Key Data Points
Real-world use cases
Above all else, I'm convinced that Ethereum will be a leading blockchain network for the decentralized apps of the future. Sure, there are alternatives, and some of them offer technical advantages today. For example, both Avalanche (AVAX +3.24%) and Cardano (ADA +4.26%) offer fully Ethereum-compatible virtual machines that can run smart contracts designed for the older platform -- and they do it faster and cheaper right now.
However, the Ethereum network is evolving as we speak, and a next-generation version, formerly known as Ethereum 2.0, should be available by the end of 2022. After that upgrade, Ethereum's network will match or beat Avalanche's and Cardano's processing times, with transaction fees dropping to nearly zero. At the same time, the new system's proof-of-stake architecture will cut Ethereum's electric-power consumption by 99%.
Image source: Getty Images.
Ethereum's developers see this massive improvement as a mere stepping stone on the road to even faster, cheaper, and more scalable Ethereum transactions. That's what it will take before smart contracts can replace old-school banking and payment systems on a global scale -- and Ethereum has a clear roadmap to get there.
It's true that rivals like Cardano and Avalanche will continue to evolve over time, as well, but I don't see that as a threat to the Ethereum solution. Instead, it's a healthy rivalry that should spur all competitors to achieve more ambitious goals in the long run. As a long-term investor, I don't mind buying in early and waiting many years for a big payoff.
The token is selling at a deep discount
As I noted earlier, Ethereum was swept up in the market's broad retreat from high-growth and high-risk investments in recent months. The S&P 500 market index is down by 17% in the last six months, and the more volatile Nasdaq Composite has fallen 29% over the same period. As a newer and faster-growing investment, Ethereum took an even harder hit, with a 55% price drop:
Ethereum Price data by YCharts.
Occasional corrections are a natural part of the market, and it's just as natural to see high-flying alternatives such as Ethereum falling harder and faster than more traditional asset classes. At the same time, I'm sure that Ethereum will get back up, dust itself off, and get back to its old market-beating ways again. The proof-of-stake upgrade will help tremendously, and the fast-growing community of Ethereum-oriented app developers is crucial to this token's future prospects.
Ethereum is an investment that you should buy on the dips, and we are knee-deep in a tremendous buying opportunity right now. You can come back and thank me for this advice in two or three years, when Ethereum's network upgrade is complete and decentralized-finance apps start to feel normal to ordinary users.
