There are plenty of cryptocurrencies out there -- thousands, in fact. Each one has passionate advocates who claim it will provide life-changing returns and be the next big thing. But the reality is that only a small minority could actually be considered sound long-term investments.
For those looking for less risky options and gains that only cryptocurrencies can provide, three stand out in particular.
Let's take a closer look at Aave (CRYPTO: AAVE), Ethereum (CRYPTO: ETH), and Bitcoin (CRYPTO: BTC) -- three cryptocurrencies with strong fundamentals and compelling future prospects.
Aave is a decentralized finance (DeFi) protocol that has quickly become a cornerstone of the growing digital economy. In simple terms, Aave functions like a bank. It allows users to supply their crypto assets to earn yields and also enables them to borrow against those assets. This dual functionality has made Aave a key player in decentralized finance, which aims to eliminate the need for traditional financial institutions like banks and lenders.
To date, Aave has secured over $20 billion in assets, an impressive milestone that reflects the trust and confidence it has earned within the DeFi space. This success has catapulted Aave to the forefront of the DeFi movement, generating significantly more revenue than any other protocol over the last year. And things might get even better for Aave's token holders.
There is the introduction of a "fee switch" in the pipeline, which would distribute a portion of the protocol's revenue to Aave token holders. This could provide additional value to investors and increase the attractiveness of holding Aave tokens over the long term.
Ethereum might not seem like a surprise inclusion on this list, but its performance over the last year has lagged behind some of its peers. Despite this, Ethereum remains the most liquid, active, and used blockchain in the entire cryptocurrency space. Several tailwinds on the horizon could provide a significant boost to its price and long-term value.
In the short term, Ethereum stands to benefit from the same DeFi resurgence that could lift Aave. More than half of all DeFi activity takes place on the Ethereum blockchain. This means that if there's an increase in DeFi activity, Ethereum will naturally be one of the biggest beneficiaries.
But it's not just DeFi that could drive Ethereum's growth. Ethereum has several long-term catalysts that could push its price higher. One is the tokenization of real-world assets. Whether it's real estate, art, or even company shares, tokenization has the potential to move trillions of dollars worth of assets onto the blockchain. Ethereum's established network and smart contract capabilities make it the ideal platform for this transformation.
Additionally, Ethereum's track record of successful upgrades and its well-defined roadmap for improving scalability make it well-positioned for future growth. Although its price has faced recent challenges, long-term investors could view this as a prime opportunity to invest in one of crypto's blue-chip assets before the next wave of adoption accelerates.
It might not win any points for originality, but Bitcoin remains a top choice for investors seeking long-term growth. In fact, Bitcoin's path forward is perhaps the clearest of any cryptocurrency. Its established position as the original and most valuable cryptocurrency gives it a significant advantage as it continues to evolve and grow.
There are several short-term factors that could fuel Bitcoin's growth. One is the recent halving, which reduced Bitcoin's inflation rate to below 1%. This supply shock typically leads to a price increase, as has been the case in previous halving cycles. Additionally, the growing interest in spot Bitcoin exchange-traded funds (ETFs) has increased buying pressure, with institutional investors eager to gain exposure to Bitcoin.
Moreover, Bitcoin's best performance has often come toward the end of the year, so it could have another strong finish this year.
Looking further ahead, though, it is the long-term macroeconomic factors such as rising government debt, increasing inflation, and geopolitical uncertainty that make Bitcoin such an attractive asset. As fiat currencies continue to lose purchasing power, more investors will look to preserve wealth and Bitcoin will likely rise to become the ultimate hedge against economic instability.
With Bitcoin's price currently hovering around $60,000, it's not hard to imagine it reaching six figures in the near future. Some experts even believe Bitcoin could one day hit seven figures as its role as a safe haven asset becomes more prominent. With its limited supply of 21 million coins, Bitcoin is positioned to continue its historic run over the coming years.
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RJ Fulton has positions in Aave, Bitcoin, and Ethereum. The Motley Fool has positions in and recommends Aave, Bitcoin, and Ethereum. The Motley Fool has a disclosure policy.