One of the most significant and prevalent cryptocurrencies is Ethereum (ETH-USD). Engineers can create and implement decentralized applications (dapps) and intelligent transactions on this accessible blockchain network. The Ethereum Virtual Machine (EVM) provides an execution engine for transactions.
However, ETH has had challenges recently, just like many other cryptocurrencies. During the protracted “crypto winter,” Ethereum saw its token price fall steeply. It’s still well off its all-time high but is up approximately 60% year-to-date.
So, what to make of the world’s second-largest cryptocurrency? Well, I think this is a token that may be worth a look for investors seeing diversification. Here’s why I hold this token, and I think it’s still worth buying.
Upcoming Upgrades Are a Big Deal
Last year, Ethereum successfully executed its biggest upgrade ever, its so-called Merge.
Since the Merge, Ethereum’s token price has remained relatively flat, ebbing and flowing. However, the run-up this token saw before its upgrade was impressive.
Ether is seeing similar interest now, with a double-upgrade expected later this month. On or around Apr. 14, Ethereum is expected to undertake its Shanghai and Capella upgrades. These upgrades will improve Ethereum’s consensus layer while allowing for staked Ether to be withdrawn.
This is a massive deal for investors, particularly those who staked their Ethereum directly or via a liquid staking network like Lido DAO (LDO-USD). The ability to withdraw tokens and have that liquidity (if needed) likely means staking demand will pick up.
Accordingly, the more tokens are locked in and staked, the better Etheruem’s supply dynamics will be. With the Merge effectively resulting in a low-inflation (or perhaps deflationary) token, these upgrades are expected to vastly improve Ethereum’s tokenomics moving forward.
Quality Is Everything Right Now
In the crypto space, there are plenty of scams, rug pulls, regulatory scrutiny, and lawsuits happening right now. It’s a space that’s filled with traps, and many investors have lost 100% of their money in short periods of time investing in smaller-cap projects that imploded. Accordingly, caution should be taken when investing in this space.
However, like in the stock market, investing in quality projects with growth prospects and a real ecosystem of utility-generating applications is key. Ethereum is the world’s largest ecosystem of decentralized applications that provide real-world use cases. Thus, for investors seeking the best of the best, Ethereum is really about as top-tier as it gets in this space.
As a long-term holding, and a way of diversifying a portfolio’s exposure to asset classes, I think Ethereum is a great choice. This holding makes up a very small percentage of my portfolio, and I think investors certainly want to be aware of position sizing when thinking about holding digital assets. That said, this is a holding I’m going to stick with long term, and see where it goes.
On the date of publication, Chris MacDonald has a position in ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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