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The massive explosion of popularity in the cryptocurrency industry the last year has had numerous consequences and outcomes. Besides Bitcoin, Ether and other lesser-known cryptocurrencies rallying substantially, stocks in the industry, such as Coinbase (NASDAQ:COIN), have attracted attention from investors too.
It’s understandable that investors want new ways to play the industry. There’s certainly some potential for Coinbase stock as exchanges are some of the fastest-growing companies in an industry that continues to see new coins created every day.
Despite this potential, though, I believe it won’t last as long or offer nearly as much total growth potential as the Ethereum blockchain, and therefore its native cryptocurrency, Ether.
What are Coinbase stock’s biggest headwinds?
One of the biggest challenges Coinbase or any crypto exchange faces is the competition in the space. Because there are few regulations and they are different worldwide, there are several ways to get into the crypto industry.
Whether it’s a massive competitor like Binance or one of the hundreds of smaller exchanges, there are also crypto on-boarding platforms that allow investors to purchase the major coins such as Ether and Bitcoin.
All of this competition means a smaller slice of the pie for Coinbase unless it can differentiate itself from the competition.
Another issue it faces is the fact that it relies on heavy trading in the industry and growth in popularity. That hasn’t been a problem over the last year. However, it’s unlikely this popularity in the industry will grow forever.
With thousands of coins in existence today, there will inevitably be consolidation in the industry. So in my view, it will be tough for Coinbase to grow long term, which is why I’d rather own the top cryptocurrencies such as Ether as a long-term investment.
Why Ethereum is better
Although Ether is in the cryptocurrency industry, it’s a completely different investment than Coinbase stock. It’s entirely possible that Ether could rally rapidly for years, while Coinbase doesn’t grow at all.
Ether is such a quality investment because it’s the native currency of the most actively used blockchain, Ethereum.
The Ethereum blockchain has opened up a tonne of doors and possibilities in the crypto industry spurring huge innovation. As developers continue to come up with unique decentralized apps to run on the Ethereum network, Ether will see ever-increasing demand to power these smart contracts.
That’s why Ether has so much potential and has been rallying considerably the last year. Not only have more investors realized its potential and bought up Ether, but the industry continues to see more innovation, driving up the demand for Ether.