Despite growing 50% this year, Ethereum, the world's second-largest digital asset, has been underperforming in comparison to Bitcoin and other cryptocurrencies, trading below $2,000. The cryptocurrency's dominance in the blockchain sector is attributed to its introduction of smart contracts in 2015, which gave it a first-mover advantage in areas such as non-fungible tokens (NFTs) and decentralized finance (DeFi). It currently holds a significant 54% of total value locked (TVL) in DeFi, making it the leading Layer 1 blockchain.
This dominance, however, could potentially be disrupted by competitors like Solana or Avalanche. Ethereum's extensive developer network led by founder Vitalik Buterin is dedicated to continuous improvement. They executed a complex technical feat known as The Merge last year and have plans for further upgrades like Dencun in early 2024, which has received high praise from Goldman Sachs (NYSE:GS).
Investor interest in Ethereum may have dwindled due to The Merge failing to meet expectations. Improvements post-Merge were marginal and high transaction fees persisted. Uncertainty about future staking on the blockchain lingered until it was resolved in April 2022. Furthermore, sectors that initially sparked interest in Ethereum like NFTs and the metaverse lost favor in 2022. The rise of generative AI like ChatGPT also shifted investor sentiment away from Ethereum.
Despite these challenges, Ethereum remains a promising long-term investment opportunity. With its current low price and the potential for growth from the upcoming Dencun upgrade, now could be an excellent time to invest. Although not among the top stocks recommended by the Motley Fool Stock Advisor, it remains a viable long-term investment option.
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