Crypto markets are nothing if not volatile. Look no further than this summer, when the price of Ethereum (ETH -2.23%) plunged to a 52-week low of $896.11 in June. It then more than doubled over the course of the summer as investor enthusiasm for The Merge, Ethereum's long-awaited transition to proof-of-stake consensus, reached a crescendo.
Ethereum then sold off once The Merge actually took place. This is a difficult market to time, but smart investors know that investing in projects with real long-term utility and value rather than chasing the next pipe dream is the right way to invest in this volatile but exciting market. Here are three cryptocurrencies the smartest investors are buying in September.
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1. Ethereum
Let's start with Ethereum. I have owned Ethereum for a long time. I bought some more before The Merge, and I added to my position after it was completed. Here's what I love about Ethereum: While The Merge was a monumental undertaking, it's by no means the end of the road for development on Ethereum. In fact, The Merge is just one step in a well planned roadmap that charts out many more improvements to come.
The Merge has already reduced Ethereum's energy consumption by more than 99% and turned Ethereum into a deflationary asset by reducing the issuance of new ETH, which is nothing to sneeze at. While The Merge itself didn't make transactions on Ethereum faster or cheaper, it paves the way for the next phase of Ethereum's evolution, sharding, which will split up the network's workload and increase Ethereum's throughput to 100,000 transactions per second.
The ability to earn rewards by staking Ethereum also adds to its appeal. Users need to commit 32 ETH to run their own node and to validate transactions, so this isn't a viable option for all Ethereum users as one would need over $40,000 worth of Ether based on current prices to participate. However, users with less Ethereum can stake their Ethereum with popular services like Coinbase Global and earn interest with a current APY of about 4%.
With more people able to participate in earning rewards in the Ethereum network than ever before, and more upgrades to come, Ethereum continues to look like one of the top cryptos to own.
2. Chiliz
Speaking of cryptocurrencies with a long-term vision, Chiliz (CHZ -2.23%) is the crypto behind the Socios fan token platform and it made waves this summer when it acquired a nearly 25% stake in FC Barcelona's Barca Studios for around $102 million. This gives Chiliz an ownership stake in a tangible and potentially lucrative real-world asset. FC Barcelona is one of the world's most popular soccer teams, and Chiliz will use its new investment in the team's digital entertainment arm to work with Barcelona on non-fungible token and metaverse projects. Chiliz and Barcelona aren't publicly traded companies, so the financials of Barca Studios are opaque, but the deal gives Chiliz a lot of upside thanks to Barcelona's massive fanbase and global reach. It may even give Chiliz some downside protection because its stake is an asset that could theoretically grow in value or be sold later on.
Fan tokens are akin to a club membership for popular sports teams. That they give holders perks such as access to special events or the right to vote on certain decisions such as alternate uniforms or murals in the team's stadium or locker room. Some of Europe's most successful and highest-profile soccer teams have issued fan tokens on Chiliz's Socios platform. Soccer is the most popular sport globally, but Chiliz and Socios are making inroads beyond the soccer pitch. Socios is already working with NFL teams and even UFC fighters. Chiliz is a great way to invest in the overall growth of fan tokens.
3. Bitcoin
Lastly, any discussion of what cryptocurrencies the smartest investors are buying has to include Bitcoin (BTC -2.76%), the 800-pound gorilla in the room when it comes to crypto. Much of the crypto community's focus over the last few months has been on Ethereum and The Merge, and the upgrades it brought to the network. But could The Merge also be a good thing for Bitcoin?
Many observers have understandably praised Ethereum's move to proof of stake because it is good for the environment. But Ethereum's move to proof of stake could benefit Bitcoin as well, as it now stands out atop the market as the lone major proof-of-work cryptocurrency, making it more differentiated than ever. Some crypto users also feel strongly that proof of work is more secure and more decentralized than proof of stake, and that it has a longer track record.
As an investor who owns both Bitcoin and Ethereum, I welcome the further divergence between the two cryptos and the different roads they are taking. While Ethereum is home to exciting developments such as smart contracts, non-fungible tokens and decentralized finance (DeFi), Bitcoin still plays an important role atop the crypto ecosystem that some participants have called "digital gold" or even the "internet's base monetary layer." For all of the progress other projects have made, Bitcoin dominance, which measures how of the global crypto market cap is in Bitcoin, still stands at over 40%. Bitcoin has a maximum supply of 21 million coins and is thus viewed as a store of value and a potential inflation hedge by many people all over the world, making it a different type of investment than Ethereum.
At the end of the day, cryptocurrencies are volatile and crypto investors have slogged through a difficult 2022. Smart crypto investors know that investing in cryptocurrencies with compelling long-term roadmaps and continued development like Ethereum, real-world inroads like Chiliz, or a long-term store of value like Bitcoin are worth investing in for the long run.
