The Best Cryptocurrency to Buy With $500 Right Now

The top-performing major cryptocurrency during the past 90 days is Ethereum (CRYPTO: ETH). During that time, it is up 29%. By comparison, market bellwether Bitcoin is down 4% (as of Oct. 11).

So if you're looking to invest $500 into crypto right now, it's worth taking a closer look at Ethereum. Although it has historically played second fiddle to Bitcoin when it comes to performance, it now has considerably more momentum than Bitcoin headed into the final months of the year.

The merger of traditional finance and decentralized finance

There are several factors propelling Ethereum right now. One is the rapidly intensifying merger of traditional finance and decentralized finance (DeFi). Financial market participants on Wall Street are looking for new ways to integrate blockchain technology into the modern global markets, and Ethereum is at the center of everything interesting happening there.

Image source: Getty Images.

Take stablecoins, for example. These are simply digital dollars -- cryptocurrencies pegged 1-to-1 to the value of the U.S. dollar. But they represent an important on-ramp for Wall Street investors to the world of decentralized finance. To put real-world dollars to work on the blockchain, you first need to convert them into digital dollars.

So, the rapid growth of stablecoins during the past 12 months can be taken as a useful proxy for just how much interest there is in combining the worlds of traditional finance and blockchain finance. That's important because Ethereum remains the top blockchain for stablecoins and the top blockchain for DeFi.

This summer, adoption of the Genius Act (which provides a legal framework for stablecoins) was taken as a huge vote of confidence for everything blockchain- and DeFi-related. Thus, it's perhaps no surprise that the spectacular rise of Ethereum during the past three months coincided with the onset of a stablecoin summer.

The rise of Ethereum treasury companies

At the same time, digital-asset treasury companies are starting to accumulate Ethereum rapidly. There are now more than a dozen publicly traded companies that do nothing other than invest in it. They raise capital from outside investors, and then immediately plow that money back into the crypto.

This creates a virtuous circle. Buying by Ethereum treasury companies helps to push up the price of the coin. This, in turn, makes the treasury companies more valuable, making it easier for them to borrow money from outside investors. And the cycle begins anew.

No wonder the digital token's price exploded this summer, as soon as companies such as SharpLink Gaming and Bitmine Immersion Technologies announced intentions to go on sustained Ethereum-buying binges.

Ethereum ETF inflows

A third key factor is the continued influx of new money from institutional investors into spot Ethereum exchange-traded funds (ETFs). The clear beneficiary here is the iShares Ethereum Trust, which has emerged as the premier way for institutional investors to get exposure to the crypto. It now has about $16 billion in assets under management.

It's important to keep track of these ETF inflows because they can reverse on a dime, given how easy it is to buy and sell ETFs. During the summer, demand exploded for these spot Ethereum ETFs. At the time, the crypto was skyrocketing in price, and seemingly everyone wanted a piece of it.

Can Ethereum hit $5,000 by the end of the year?

On Aug. 24, Ethereum set a new all-time high at $4,953. The world's second-largest cryptocurrency came within a whisker of breaking through the much-anticipated $5,000 mark. Since then, it has pulled back more than 20% and now trades at about $3,800.

But some investors expect Ethereum to soar past $5,000 by the end of 2025. According to online prediction markets, it has a 34% chance of hitting $5,000 before the end of the year; a 24% chance of hitting $6,000; and an 8% chance of hitting $7,000.

Of course, a lot of things need to break its way to hit those higher points. But right now, there's arguably no better way to put $500 to work in the crypto market than by investing in Ethereum.

Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.