According to The Motley Fool Ascent's 2024 Cryptocurrency Investor Trends Survey, one of the major factors holding investors back from investing in crypto is a clear lack of utility for many top cryptocurrencies. More than a third (35%) of respondents who did not own crypto said that they "did not know what to do with it."
Fair enough. It's hard to see any utility whatsoever for dog-themed meme coins, and even Bitcoin (BTC 4.33%) is still primarily a long-term store of value that you buy and hold (and don't use in your everyday life). But don't despair, crypto investors, because there are two high-quality cryptos that offer significant utility and should definitely be on your radar if utility is your priority.
Ethereum
My top utility crypto is Ethereum (ETH 5.79%). It offers a highly diversified blockchain ecosystem and plenty of everyday ways to put your crypto to use. For example, you could use your Ethereum to buy a non-fungible token (NFT) that has been minted on the Ethereum blockchain. You could use your crypto to participate in a decentralized finance (DeFi) protocol in order to earn extra yield on your investment. You could swap your Ethereum for another token using any of the decentralized exchanges running on the Ethereum blockchain. Or you could use your crypto to play blockchain or metaverse games built on top of Ethereum.
Image source: Getty Images.
You get the idea here -- Ethereum is much more than just a coin. It also functions like a digital admission ticket that gives you access to everything that's happening within its blockchain ecosystem. That's a big deal, because Ethereum is still dominant in just about every important sector of the blockchain world. For example, Ethereum still accounts for more than half (56%) of all DeFi activity in the blockchain world and is still the unquestioned leader when it comes to NFTs. So this admission ticket is actually quite valuable.
Solana
My second pick is Solana (SOL 5.51%), which is very similar to Ethereum in terms of utility. Basically, anything you can do with Ethereum, you can do with Solana. You could use your Solana to buy NFTs minted on the Solana blockchain, play blockchain or metaverse games created on the Solana blockchain, and swap for other tokens using decentralized exchanges running on Solana.
But Solana has a unique mobile crypto strategy. Unlike Ethereum, Solana has a crypto phone (the Saga) that is optimized for use with the Solana blockchain. This device also offers access to mobile apps that you can't find on traditional smartphones. And, of course, those apps are powered by the Solana blockchain, so that creates even more opportunities for utility.
Utility stocks vs. utility cryptos
In some ways, these two utility cryptos are similar to utility stocks. Just like companies providing basic services such as electricity, gas, and water, these two cryptos provide basic blockchain services to users and developers. Both are known as Layer 1 blockchain networks, and both are building blocks for creating new products and new services. If utility is your priority, then you should probably focus on Layer 1 blockchains as a starting point.
CRYPTO: ETH
Key Data Points
However, utility cryptos are very different from utility stocks in one important way -- their explosive upside potential. That's something you don't get from reliable, steady, dividend-paying stocks that provide basic services. Solana, for example, skyrocketed in value by more than 900% last year. And Ethereum is up more than 95,000% since 2015.
The link between utility and valuation
Imagine how much more valuable utility companies would be if they could capture just a tiny slice of all the economic activity based on their basic services. What if water companies, for example, could capture a slice of the economic value created by people using water within a household? Or if electric utility companies could capture a small slice of the economic value created by people using electricity in their kitchens, living rooms, and home offices?
Well, that's exactly what happens with utility cryptos. The price of Ethereum, for example, is directly linked to the amount of economic activity happening within the Ethereum blockchain ecosystem.
Think of the NFT market. If the size of the NFT market increases in value, so will the price of Ethereum. That's because, in addition to providing a basic service (the blockchain architecture needed by creators to mint an NFT), Ethereum is also able to capture a slice of all the economic activity happening on top of it (people buying and selling these digital assets within NFT marketplaces).
That's why, generally speaking, the higher the utility of the crypto, the higher the valuation. The more you can do with a crypto, the bigger its blockchain ecosystem should be. And the bigger the overall blockchain ecosystem, the greater the potential opportunity for growth.
When it comes to choosing among various utility cryptos, then, take time to analyze how much activity is actually happening within these blockchain ecosystems. That could be the best way to identify the next big utility crypto ready to skyrocket in value.
