Key Points
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Ethereum is a good choice to hold for the long term.
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It is the hub of decentralized finance in the crypto sector.
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There is also reason to believe that it will be effective in retaining its value over time.
- 10 stocks we like better than Ethereum ›
Ethereum (CRYPTO: ETH) is hardly ever the cheapest, fastest, or smoothest blockchain to use. Nonetheless, some long-term investors prefer owning it to other cryptocurrencies because they are buying an asset with exposure to a critically important platform within the crypto ecosystem more than they are depending on a single feature of that platform to generate a return.
So if you care about what may still be relevant in crypto five or ten years from now, Ethereum’s mix of stable on-chain economic activity, continued technology upgrades, and a high degree of access to traditional financing is hard to ignore as a whole. Let’s dive in and examine these factors a little more.
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This channel is the default channel for a number of activities
Ethereum is by far the most established general-purpose smart contract chain, and this status is the most important reason why it is valuable. Decentralized finance (DeFi) activities, i.e. on-chain lending, trading, and collateral management, are concentrated where the most liquidity and integrations already exist, which, in the crypto sector, effectively means that every dollar coming in has a good chance of settling on Ethereum, either temporarily or permanently.
One metric to watch in this regard is DeFi’s Total Value Locked (TVL), which is the dollar value of assets deposited into DeFi applications. Ethereum leads all other chains on TVL today, with $69.4 billion in TVL, and there is no reason to expect that to change anytime soon, as for a long time the name of the chain has effectively been synonymous with DeFi.
Ethereum is also constantly being upgraded to provide better features and efficiency for users and app developers. Recently, the channel has been experiencing a pace of two major updates per year, which is considerably higher than most of its peers.
It is also a store of value
Ethereum supply is not capped like Bitcoin (CRYPTO:BTC)but it also doesn’t try to be Bitcoin with extra features. As part of its proof-of-stake (PoS) design, network validators lock up their coins to secure the network and earn a reward; this reward is provided by issuing new Ether and adding to the supply. And, on transactions that incur gas fees, a portion of the fees are burned, removing them from circulation permanently.
It is important to note that Ethereum’s ongoing fee consumption can, and often does, exceed its ongoing issuance, so its circulating supply may decline during busier times. This makes the coin a store of value, even if its supply is not as scarce as that of Bitcoin – and being a store of value with as much utility as Ethereum is another important reason why many long-term investors prefer to hold it.
Finally, the coin now has a handful of different institutional on-ramps, which helps attract and retain institutional capital. Ethereum exchange-traded funds (ETFs) are not new at this point, but they help increase the legitimacy of the asset and make it more attractive to those with a more conservative temperament when investing.
There is no other crypto asset as attractive as Ethereum. That doesn’t mean you should buy it if you’re not completely risk-tolerant, but if you want to hold a cryptocurrency beyond Bitcoin, you should probably hold at least some Ethereum.
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Alex Carchidi holds positions in Bitcoin and Ethereum. The Motley Fool posts and recommends Bitcoin and Ethereum. 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.


