1 Emerging Trend Could Boost Ethereum for Years and Years

Ethereum (CRYPTO: ETH) may have a way out of its doldrums. More than that, it might be in the early stages of riding a trend that could send its price to stratospheric heights.

And the trend could last for a very long time, too.

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Putting assets on the blockchain is becoming a huge business

Real-world asset tokenization is a new trend that's sweeping cryptocurrency, and it's likely going to be one of the biggest stories in the entire sector during the next 10 years or so.

Tokenization is the process of storing the data describing an asset's ownership and other metadata on the blockchain as a token. Thus real-world asset tokenization refers to when companies or investors opt to track, hold, and trade assets such as bonds, stocks, real estate, or vehicles via a blockchain for the sake of easier handling. This makes trading and transferring those assets faster, cheaper, and more secure.

Boston Consulting Group estimates that the tokenized real-world asset market will be worth as much as $16.1 trillion by 2030. But, only about $22.1 billion worth of assets are actually tokenized and held on-chain now. So, if the management consulting firm is right, there will be a tsunami of asset holders flocking to blockchains to tokenize, track, and trade their assets during the next five years. In which case, blockchains that have positioned themselves as secure, convenient, and fully featured tools for those activities could capture disproportionate shares of those asset inflows, which would almost certainly balloon the value of their tokens in the process.

On that front, Ethereum is an early leader.

According to CoinGecko, a crypto data source, of the $38.9 billion in total market cap of the real-world asset tokenization sector, $25.5 billion in value is hosted on Ethereum. To be clear, that's the value of all the coins and tokens that are intended to help others to tokenize or manage their real-world assets. Though that sum does not include the value of major competitors like XRP that are also vying to host tokenized real-world assets, it's still fairly clear that Ethereum's presence in the sector is disproportionately large for now.

What's more, some of the world's largest and most important asset managers -- among them, BlackRock -- are aiming to use Ethereum as part of their own tokenization strategies. In terms of the sum of actual assets on its chain, Ethereum hosts about $6.6 billion, $4.9 billion of which are U.S. Treasuries. Asset managers rely on instruments like Treasuries to generate reliable yields and balance their risk, so watching their total value is an easy way to see how appealing a chain is to the big players. For the moment, there's no blockchain with a deeper on-chain Treasury market than Ethereum.

Should you buy this coin?

Real-world asset tokenization isn't the only thing happening with Ethereum today. And that's why it's still quite a risky play to purchase the cryptocurrency.

Generally speaking, it's facing stiff competition for growth in segments like artificial intelligence (AI) from chains like Solana that operate faster and for lower fees. Investor sentiment is terrible, and there are no clear impending catalysts in the near term. It may also struggle to win the fight for asset tokenization market share to rival chains that were better designed to cater to the needs of the traditional financial sector, like XRP. Its smart contract technology was once unique and innovative. Now, it's just one chain among many others offering similar tech, and its version has no clear competitive advantages.

Even so, winning even a slice of the real-world asset tokenization market would likely be enough to reverse Ethereum's fading fortunes and then some. It's currently the best-positioned chain in the niche, based both on the size of its project ecosystem and the value of the assets already parked on it. Rumors of its demise are exaggerated.

You probably shouldn't buy Ethereum until its competitive positioning improves enough for it to capture new capital reliably once again. Still, if major asset managers keep delivering their votes of confidence in the chain, that shift could come in a few quarters. So be sure to follow along as the tokenization trend starts to pick up speed.

Should you invest $1,000 in Ethereum right now?

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Alex Carchidi has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum, Solana, and XRP. The Motley Fool has a disclosure policy.