Crypto prices may be on a downhill slide, but that also means now is the most affordable time to invest. Major cryptocurrencies like Bitcoin (CRYPTO:BTC) and Ethereum (CRYPTO:ETH) have fallen by more than 40% since November of last year, and investing now means buying at a discount.
However, it’s important to choose wisely when deciding where to invest. Especially with all the volatility within the market right now, not all cryptocurrencies will survive over the long term.
While there are never any guarantees with crypto (and there’s a chance that even the strongest investments won’t be around forever), there’s one cryptocurrency, in particular, that I’m continuing to buy: Ethereum.
Ethereum’s biggest advantages
There’s some stiff competition within the crypto space, with new tokens being developed by the day. This makes it especially challenging for any investment to stand out, but there are a few reasons Ethereum is a strong competitor.
For one, Ethereum is a programmable blockchain that can host everything from non-fungible token (NFT) marketplaces to decentralized-finance applications and more. This makes it more than just a payment coin, so even if cryptocurrency doesn’t catch on as a form of exchange, Ethereum could still have staying power.
The programmable aspect of Ethereum’s network also makes it a strong competitor within the metaverse, which will rely heavily on blockchain technology and decentralized applications. Ethereum is a major player in those spaces, and if the metaverse takes off, Ethereum could be one of the biggest winners.
Finally, Ethereum’s latest upgrade could give it an even more significant advantage. Right now, the biggest hurdles it’s facing are its sluggish transaction times and high fees. It’s currently in the process of updating to a proof of stake (PoS) model, however, which should solve both of those problems.
After its update (which should be completed sometime next year), it could see transaction times of up to 100,000 transactions per second, compared to its current rate of roughly 14 transactions per second.
Should you invest in Ethereum?
Ethereum is one of the stronger players in the crypto space, but it’s not right for everyone. Before you buy, there are a few things to consider.
First, think about how much risk you’re willing to take. While Ethereum has plenty of advantages, there are no guarantees that it (or crypto, in general) will succeed over the long term. Because cryptocurrency is still speculative right now, there’s a chance you could lose your entire investment if it fails.
Also, consider how much volatility you’re comfortable with. Even if Ethereum thrives over time, there likely will be lots of ups and downs along the way. It’s not unusual for cryptocurrency prices to plummet regularly. In fact, Ethereum once lost roughly 95% of its value back in 2018. If you’re uncomfortable with this level of volatility, it may be wise to steer clear of crypto for now.
Finally, make sure the rest of your portfolio is well-balanced before you dip into crypto. Because Ethereum is relatively high-risk, it’s important that the rest of your investments are diversified. That way, if Ethereum doesn’t succeed over time, it won’t sink your entire portfolio.
Ethereum can be a fantastic investment, but it’s important to think carefully about whether cryptocurrency is the right option for you. By considering your tolerance for risk, it will be easier to decide whether Ethereum belongs in your portfolio.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.