The Smartest Cryptocurrency to Buy With $1,000 Right Now

During the past several years, a growing number of investors have become more receptive to the idea of holding alternative assets. Beyond categories such as real estate, artwork, or rare collectibles, some investors have deliberatively carved out a portion of their portfolio for cryptocurrency.

If you are new to investing in cryptocurrency and only seeking some modest exposure, I think Ethereum (CRYPTO: ETH) makes for a healthy balance between real-world utility and long-term growth.

Let's explore what makes Ethereum unique in the world of crypto and assess what an investment of $1,000 could look like down the road.

Ethereum is more than a cryptocurrency, it is the backbone of web3

During the early days of the internet, its primary use case was to facilitate how users acquired information. This application is what gave birth to search engines like Google and Yahoo! as well as online payments systems such as PayPal.

Years later, social media platforms such as MySpace and Facebook emerged -- completely revolutionizing how people interacted and communicated with one another.

Now, a third phase -- known as web3 in the crypto realm -- is coming to light. Web3 is best thought of as a decentralized platform in which users can control the direction of their finances and personal information independent of corporate intermediaries.

At the center of this digital economy is Ethereum, a blockchain that manages decentralized applications (dApps) and financial transactions (DeFi).

DeFi reimagines traditional financial protocols such as lending, trading, and earning interest, without the use of a bank or brokerage. In a web3 universe, investors conduct these same financial services but through automated smart contracts on the Ethereum blockchain.

Beyond finance, users can engage with one another through a series of applications -- from non-fungible token (NFT) marketplaces to metaverse gaming ecosystems.

Whether someone is minting an NFT, tokenizing a real-world asset, or making a transaction with stablecoins, Ethereum's blockchain is hard at work in the background. These use cases are what make Ethereum so unique. It's more than investing in a cryptocurrency -- it's owning a foundational layer on which digital economies are built.

Image source: Getty Images.

Why Ethereum could outperform its competition in the long run

When investors think about investing in Ethereum, my hunch is that you may initially compare it to other opportunities such as Bitcoin or XRP. In reality, Ethereum is very different from these two cryptocurrencies.

Bitcoin is best thought of as digital gold, as the cryptocurrency has a fixed supply limit of 21 million coins. This structure inherently creates a scarcity mindset, lending to the idea that Bitcoin is a store of value. By contrast, XRP is disrupting how payments are made across borders -- offering a faster and lower-cost solution than incumbent financial infrastructure.

In my view, blockchains such as Solana, Cardano, Avalanche, and Polkadot are closer peers to Ethereum. These competitors do not have the same breadth of Ethereum's developer base and therefore still come with execution risk and limited use cases at this time.

Ethereum's diversified ecosystem is one of the factors contributing to its position as a treasury asset on corporate balance sheets. Moreover, much as with Bitcoin, financial institutions may come to accelerate their exposure to other cryptocurrencies -- particularly though wider adoption of Ethereum exchange-traded funds (ETFs). Rising inflows from big banks and investment funds could play a pivotal role in Ethereum's upside in coming years.

How a $1,000 Ethereum investment could compound over time

If you had invested $1,000 in Ethereum just five years ago, that sum would now be worth close to $8,000.

Ethereum Price data by YCharts

Granted, this is a pretty abnormal return for a relatively short time period. Geoff Kendrick of Standard Chartered forecasts that Ethereum could be worth $25,000 by 2028 -- representing about 600% upside from current levels.

Whether Kendrick's forecast is accurate, I'm bullish on Ethereum's long-term prospects -- much further than three years down the road. The nuance investors need to understand is that cryptocurrency is much more volatile than stocks or bonds. So while Ethereum could be worth tens of thousands of dollars decades from now, investors should expect a crypto winter or two sprinkled in between periods of gains.

Nevertheless, Ethereum's unique combination of utility, ecosystem scale, and potential for institutional adoption make it the most compelling cryptocurrency to get started with, in my view.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Avalanche, Bitcoin, Ethereum, PayPal, Solana, and XRP. The Motley Fool recommends Standard Chartered Plc and recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2025 $75 calls on PayPal. The Motley Fool has a disclosure policy.