Before highlighting a crypto investment opportunity, one that I consider the best cryptocurrency for the long haul, it is critical to understand why you should pay attention to cryptocurrency at all.
The world is increasingly digital and interconnected. Marc Andreessen, co-founder of Netscape and General Partner of Andreessen Horowitz famously stated in 2011 that “software is eating the world.”
This has proven to be more than true. Companies and people are more dependent on technology than ever to perform.
A large part of this transformation is the result of Moore’s Law and the advent of the Apple iPhone. With a computer in the hands of the world, users can now access information digitally, reducing barriers, and friction.
Furthermore, cloud computing has dominated the past decade – as companies in large part prefer to access software over the web instead of installing and maintaining on-campus networks.
So, it only makes sense that banking, payments, payment infrastructure and money would (and continue to) move increasingly online.
Digital wallets like Venmo and CashApp have helped to improve peer-to-peer money transfers in the U.S. For users, the experience is drastically better than the alternatives using the banking system.
So, banks had to act and established Zelle, which is doing extremely well.
Much work is yet to be done when it comes to streamlining international payments and B2B banking services.
In my view, the use of digital dollars (stablecoins) like Circle (USDC) will certainly play a role in this transition.
USDC is available for transfer and use 24/7 globally and resides natively within the internet. Therefore, it can operate at the speed of the web. Every USDC dollar is backed 1:1 by USD.
Improving trust and transparency are paramount objectives for the evolution of the best cryptocurrency and the crypto industry as a whole.
Circle (USDC) is helping to improve the ecosystem by becoming a public company with audited financial statements showing their non-crypto reserve assets held at leading institutions.
Circle’s evolution is an important iteration. Circle helps to remove systematic risk, as previously, Tether (UST) was the single source of crypto liquidity.
What that means is that traders would traditionally rely on Tether to move in and out of their cryptocurrency positions back into a stable asset akin to a digital dollar ($1 USD).
Reducing dependence on Tether via an alternative liquidity source is a positive development.
This Leads Us to the Best Cryptocurrency for the Long Term ... Ethereum (ETH)
Circle (USDC) is the largest fiat currency-backed stablecoin on Ethereum and represents the biggest ERC-20 asset within the Ethereum ecosystem.
ERC-20 is the standard used for creating and issuing smart contracts on the Ethereum blockchain. Those words are a lot to unpack so let’s dive in.
ERC-20 is a standard protocol or set of rules to operate on Ethereum. Smart contracts are a set of instructions in the form of code and data that reside on the ETH network. These smart contracts are the building blocks of Ethereum web applications.
Smart contracts digitize agreements by turning the terms of the agreement into computer code that automatically executes when the contract terms are met (Source: Ethereum).
An example helps illustrate this. Imagine you write a program that holds funds in escrow for a child, allowing them to withdraw funds after a specific date. If they try to withdraw the funds before that specific date, the smart contract will not execute.
Aha! Programmable money.
Unlike Bitcoin, the first cryptocurrency, smart contracts allow an entire financial ecosystem to be built atop Ethereum.
This is exciting because ETH is a platform technology – meaning that others depend on it for their businesses and users depend on it for their own individual use cases, which is the primary reason that ETH is the best cryptocurrency of many.
According to reports issued by the Ethereum foundation – the entity that oversees ETH – the nonprofit holds over $1.6 billion on its balance sheet. Much of these reserves are held in the form of their own native currency ETH, while $300 million is held in non-crypto assets.
In my view, this is positive because it is akin to a founder still holding a large portion of his or her net worth in shares of the company instead of seeking a quick liquidity event.
A Note on Cryptocurrency and Web3
A lot of what I would describe as “web3” projects are consumer focused not B2B. History would tell us that consumer economies are largely winner-take-all – to generate a level of sustained profitability, these markets tend to oligopoly.
From an investment standpoint, focus on platform technologies, not one-trick ponies.
With an eye on the upcoming network upgrade (“The Merge”), look for ETH to continue to grow in value in the years ahead.
To learn more about investing in cryptocurrency, and to see which other tokens I’m currently bullish on, consider a subscription to Cabot SX Crypto Advisor today!