Last year was a tough one for cryptocurrency — and for those who held it. Amid economic uncertainty, investors fled assets viewed as risky and sought out safer plays. But things have been looking brighter for cryptocurrency since the start of 2023.
The global market value of all cryptocurrencies has climbed from about $800 billion as of the end of 2022 to more than $1.1 trillion now. The general economic woes aren’t over, but even if full recovery takes a while, it’s easy to see that some players in the crypto market still have great long-term prospects. Ethereum (ETH -1.41%) is a perfect example. And it’s the one cryptocurrency I’d buy right now.
The top blockchain among developers
Ethereum is the world’s second-biggest cryptocurrency by market cap after Bitcoin. It’s already a leader in many areas from decentralized applications (dApps) to non-fungible token (NFT) sales. More than 5,000 developers are building applications on Ethereum, according to an Electric Capital report. That makes it developers’ top blockchain among the thousands in existence. And Ethereum also takes the No. 1 spot when it comes to NFT sales, CryptoSlam data show.
Last year, Ethereum underwent “The Merge,” an upgrade that made the blockchain even better. That’s because it switched the transaction validation method to proof of stake from proof of work. This cut Ethereum’s energy use by more than 99%. It also meant that Ethereum holders gained the opportunity to earn passive income by staking their tokens.
A new upgrade — dubbed Shanghai — set for March will make it possible for validators to withdraw their staked assets and rewards. Until that point, staked assets must remain locked up in the network. A flurry of withdrawals may result in a bit of short-term downward pressure on Ethereum’s price. But over time, the move to enable withdrawals should attract more and more investors to stake their holdings. And that’s a big positive.
Faster and cheaper transactions
But that’s not the end when it comes to upgrades. And what’s ahead could truly drive growth for Ethereum. The blockchain aims to introduce sharding later this year. This involves splitting up a database horizontally. As a result, the workload is spread out, relieving congestion on the network. This should lead to faster and cheaper transactions.
This solves Ethereum’s two biggest problems: Users often complain about it being both slow and expensive. With sharding, it could process a mind-blowing 100,000 transactions per second. That’s compared to about 30 today.
So Ethereum is a top player today in the world of cryptocurrency — but upcoming upgrades are likely to make it even better for both users and investors.
Now, let’s look at price. Ethereum lost more than 67% last year as the entire crypto market sank. So far this year, the token’s price has climbed by about 37%.
This is a great time to get in on the Ethereum story. The cryptocurrency slid to bargain levels in 2022, and it’s starting to show signs of recovery. At the same time, its upgrades should keep it in a leadership position right now and over the long term. Finally, Ethereum’s price declines last year weren’t due to a problem with the cryptocurrency itself, but instead a reflection of investors’ preference during that period for safer assets. All of this makes Ethereum a cryptocurrency I would rush out and buy today.
Adria Cimino has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.