Shiba Inu (CRYPTO:SHIB) is falling sharply this month, with prices for the meme token down 30% from an all-time high of $0.000088. The dip is painful, but the good news is that investors have better options within the cryptocurrency space. Let’s explore the reasons Ethereum (CRYPTO:ETH) and Aave (CRYPTO:AAVE) could make excellent alternatives for long-term investors.
With a valuation of $558 billion, Ethereum is the second-largest cryptocurrency, commanding 19.3% of the market’s total capitalization. And while newer blockchains have overshadowed its technical capabilities, Ethereum’s first-mover advantage and respected development team will help it maintain its dominant position.
It launched in 2015, and its developers aimed to expand the potential uses of blockchain technology outside of simply storing and transferring value. They achieved this by optimizing the network for decentralized application (dApp) development. These programs use self-executing smart contracts to function without a centralized intermediary, and they use Ethereum’s native token, Ether, to transact on the blockchain, boosting its value.
With a transaction capacity of just 13 per second, Ethereum has fallen behind newer blockchains like Solana, which can handle 50,000 transactions per second. But Ethereum’s first-mover advantage has given it a strong brand, attracting big-name projects like meme token Shiba Inu (worth $31 billion), which said it chose to build on Ethereum because the platform is “secure and well-established.”
Ethereum aims to fix some of its scalability challenges through an update called Ethereum 2.0. It aims to transition the network from a proof-of-work protocol (miners validate transactions by solving puzzles) to a proof-of-stake system where miners use existing tokens to validate transactions. It is unclear when Ethereum 2.0 will go live, but the blockchain’s active development community will help it respond to market needs.
Aave is a decentralized finance (DeFi) application programmed on the Ethereum network. With a market cap of $4.5 billion, the token has soared over 400% year to date. And it can maintain the bull run because of its potential utility for consumers.
DeFi networks are a popular application of blockchain technology because they allow people to access financial services without a centralized intermediary. And according to a CNBC study, nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, so there is a massive potential market for these platforms.
At its core, Aave is a blockchain-based money market. It allows peer-to-peer lenders to earn passive income from their cryptocurrency while allowing borrowers to cash out (without selling) by using their holdings as collateral for another digital asset that can be easily converted into fiat currency. The platform handled $28 billion worth of capital at the time of this writing and supports over 20 tokens listed on its website.
Founded in 2017 under the name ETHlend (this was changed to Aave in 2018), it is one of the earliest DeFi platforms to hit the market, giving it a first-mover advantage. Ethereum’s plan to upgrade with Ethereum 2.0 could also be a big catalyst for Aave’s long-term growth.
Focus on fundamentals
At first glance, high-flying meme coins like Shiba Inu (up 60,000,000% in just over a year) look like the best opportunities in the crypto space. But meme coins might struggle to maintain their valuations because of weak fundamentals. Long-term investors should bet on assets like Ethereum and Aave, which aim to expand the potential uses of blockchain technology.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.