Don't look now, but after a miserable first half of 2022, cryptos are quietly staging a fast and furious comeback from their lows over the past month and a half -- right after many commentators seemingly wrote them off. If you're a new crypto investor and want to dip your toes in the digital waters after this renewed optimism, here's the cryptocurrency that I'd buy right now: Ethereum (ETH 3.88%).
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Momentum returns
Since hitting a cycle low of $897 on June 18, Ethereum has rewarded its holders with a gain of 97% off of this low point, illustrating how quickly things can change in the crypto market, especially based on sentiment. If you're wondering if it's now too late to invest in Ethereum, remember that it's still down 63% from its all-time high of $4,847, which it hit last November. Furthermore, if Ethereum reaches mass adoption by the general public, it's likely that everyone is still "early." Given how volatile cryptocurrency can be on a day-to-day basis, an investor interested in starting a position in Ethereum but worried about buying after a run-up could benefit from using a strategy that has long been utilized by equity investors, dollar-cost averaging, to start a smaller position now and then layer into it over time instead of starting a full position all at once.
CRYPTO: ETH
Key Data Points
Coming up on The Merge
The major factor behind Ethereum's recent rise is its impending transition to proof of stake. This transition, often referred to as The Merge, is the biggest change that will happen to the Ethereum network and its users in years, if not ever. Switching to the proof-of-stake consensus should help to address two of the main challenges that Ethereum has been dealing with for years -- high transaction fees and long wait times for transactions. Furthermore, it will allow more users to participate in the Ethereum network and earn rewards by staking their Ethereum. This essentially means that users will be able to help secure the network by committing some of their Ethereum to validate transactions in exchange for a cut of staking rewards. Lastly, the transition will help Ethereum to become more climate-friendly by reducing its carbon footprint, which has been a major criticism lobbed at proof-of-work cryptocurrencies over the years.
The foundation of DeFi
Ethereum has a $208 billion market cap, dwarfing all other cryptocurrencies aside from Bitcoin. It also predates most of today's other prominent cryptocurrencies with a launch date all the way back in 2015, which is eons ago in crypto terms. As such, Ethereum has significant stature within the world of crypto, and Ethereum is the system that underpins much of the decentralized finance (DeFi) ecosystem today. Many other popular cryptocurrencies are ERC-20 tokens built on Ethereum, including USD Coin, Uniswap, and Shiba Inu. Polygon, which is now the 13th largest cryptocurrency by market cap after a torrid performance this summer, was built as a scaling solution for the Ethereum ecosystem.
Furthermore, the importance of Ethereum to DeFi and to cryptocurrency as a whole is underscored by the fact that many other top cryptocurrencies utilize the Ethereum Virtual Machine (EVM), which is essentially a layer of middleware that enables smart contracts from Ethereum to run on other blockchains.
Test the waters and layer in over time
For investors interested in getting involved in cryptocurrency, Ethereum is the cryptocurrency I'd buy right now. It offers the chance to buy a blue chip crypto that has some significant momentum behind it but still has plenty of runway ahead before approaching its previous highs. It has a significant catalyst coming up with its transition to proof of stake, and it is the foundation upon which decentralized finance is built. Cryptocurrency comes with plenty of volatility and risk, so it is best suited for risk-tolerant investors. Investors can smooth out this volatility and risk by layering into a full Ethereum position over time using dollar-cost averaging to build a position in this leading cryptocurrency.
