3 Reasons Ethereum Is Still a Buy Despite the Competition

Written by Emma Newbery for The Motley Fool->

Ethereum's drop of over 20% in the past year could be a buying opportunity.

The cryptocurrency's first-mover advantage has been hard to shake, and the pioneer still dominates DeFi, stablecoins, and real-world asset tokenization.

Financial institutions are choosing it to partner in blockchain adoption.

Ethereum (CRYPTO: ETH) is barely holding a torch to its big brother Bitcoin these days, but both have a place in a balanced crypto portfolio. Bitcoin accounts for about 60% of the total crypto market cap, compared with Ethereum's 9%. The latter has fallen over 30% in the past year to trade at around $1,665 at the time of writing (June 24).

Ethereum pioneered smart contracts, which are the secret sauce behind decentralized finance, stablecoins, and real-world asset tokenization. It remains a dominant force, but it faces competition from newer, more efficient cryptocurrencies as well as traditional financial organizations that may opt to build their own private blockchains.

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However, the crypto's main challenges right now are internal, not external. Another senior figure just left the Ethereum Foundation, and its community is questioning the chain's economics. Both are factors to keep on your radar, but I still think ongoing blockchain adoption could mean Ethereum will soar in the coming five to ten years. Here's why:

Ethereum faces competition from Bitcoin above it, and a pack of smaller smart-contract cryptos below. Bitcoin, which was designed to eliminate intermediaries from financial transactions, is attracting more institutional funds. I can understand why its store-of-value narrative appeals to investors, but let's face it: Bitcoin is somewhat of a one-trick pony.

In contrast, Ethereum is a decentralized ecosystem that's home to almost 2,000 applications and is used by thousands of full-time developers. It is a platform where people can create decentralized applications (dApps), stablecoins, games, tokenized assets, and more.

Ethereum is where the party's at. Smart contracts have underpinned every leap in blockchain adoption and real-world utility, and Ethereum is the biggest and most used smart-contract platform.

People have been predicting the digital token's demise for as long as I've been writing about cryptocurrencies. As far back as 2017, crypto insiders said that newer, faster cryptocurrencies -- so-called "Ethereum killers" -- would take their place. Turns out its first-mover advantage was hard to shake -- it still accounts for over half the money on decentralized finance (DeFi) platforms.

People trust Ethereum, which hasn't had any downtime in over a decade of operation. Its stability and large community make it an attractive choice for developers. When many people use a blockchain, developers don't have to start from scratch on each project because much of the code is already written.

Plus, it keeps developing, which is crucial if it's to stay relevant in the future. Ethereum's Glamsterdam upgrade, due this year, promises to improve scalability and lower transaction fees.

Mainstream blockchain adoption is finally within reach. Traditional financial institutions are exploring blockchain integration in a way that would have seemed impossible even five years ago. Research from The Motley Fool shows big banks and payment providers are already integrating stablecoins, which are blockchain versions of traditional currencies.

Major institutions are also moving into real-world asset tokenization, a way to record ownership of assets such as stocks, bonds, real estate, and more on the blockchain. It could be the blockchain trend of 2026, and big banks like JPMorgan Chase are using Ethereum to launch tokenized products. It accounts for about half of both the real-world assets and stablecoins in circulation.

Like all leading-edge projects, Ethereum is in constant evolution. It faces challenges, but what's important is that it has the building blocks in terms of utility, trust, and partnerships, giving it the best possible chance of success in the long term.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and JPMorgan Chase. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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