There are quite literally thousands of options for investors looking to add crypto exposure to their portfolios. However, the harsh reality is that the overwhelming majority of those options likely won't be worth much in the future.

But the ones that do have long-term potential could produce gains that only cryptocurrencies have been known to generate. If you're looking for the ultimate cryptocurrency in which to invest $1,000 in August, look no further than Ethereum (CRYPTO: ETH) for these three reasons.

1. Ethereum has a burgeoning ecosystem

Ethereum boasts one of the most expansive and diverse ecosystems in all of crypto. It is the undisputed leader of one of crypto's most innovative and prominent use cases: Decentralized finance (DeFi). DeFi, collectively worth more than $80 billion, has come a long way from its humble beginnings as a niche experiment. As one of the first DeFi-capable blockchains, Ethereum was an early leader in the space, yet it hasn't relinquished its control. Today, Ethereum remains the home of DeFi's most noteworthy players, supporting more than 50% of the total DeFi market value.

While it may seem like Ethereum faces stiff competition from other blockchains vying for a slice of the DeFi pie, this couldn't be further from the truth. A couple of years ago, such claims might have held some merit due to Ethereum's slower speeds and higher transaction fees.

However, the advent of Layer 2 solutions has transformed the landscape. Layer 2 blockchains, like Polygon, Arbitrum, Optimism, and Base, inherit Ethereum's robust decentralization and security while providing faster transactions and lower costs. This development effectively extends Ethereum's reach across the crypto space, solidifying its position as the go-to platform for innovation and experimentation.

2. Ethereum has joined an exclusive club

In a significant milestone, Ethereum recently followed in Bitcoin's (CRYPTO: BTC) footsteps by becoming the second cryptocurrency to receive approval for a spot exchange-traded fund (ETF). A spot ETF is similar to a gold ETF, allowing investors to gain exposure to the asset's price movements without actually owning the underlying asset. This is a crucial development, as it democratizes access for retail and institutional investors alike, making it easier for a broader audience to invest in Ethereum.

The arrival of institutional investors is particularly noteworthy. Until now, Ethereum's rise has been largely driven by retail investors like you and me. With the introduction of these ETFs, institutions now have a straightforward pathway to enter the Ethereum market. This influx of institutional money is expected to bring increased liquidity and stability, and, potentially, substantial price appreciation.

Interestingly, Ethereum experienced a sell-off following the ETF launch, mirroring Bitcoin's initial response to its ETF approval. However, history suggests that this could be a short-term reaction. After the selling pressure subsided, Bitcoin surged to a new all-time high, gaining nearly 60% in a single month. While it's uncertain whether Ethereum will follow the same trajectory, the introduction of ETFs is undeniably a positive development that could catalyze future growth.

3. Ethereum offers a clear opportunity

Despite these advancements, Ethereum's price has not fully reflected its potential and has lagged behind many other cryptocurrencies in this bull market. While numerous digital assets have neared or surpassed their all-time highs, Ethereum's performance has been lackluster. However, given its dominant position in the crypto space and the cyclical nature of bull markets, where new all-time highs are often achieved, Ethereum offers significant upside at today's prices. That's even more so when considering the recent sell-off across all of crypto.

Ethereum also has one of the most proven track records in the cryptocurrency space. In an industry known for its volatility and speculative nature, Ethereum stands out as a more secure and established option. Alongside Bitcoin, it is one of the few cryptocurrencies that offer a more reliable investment opportunity, making it a strong contender for long-term success.

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

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RJ Fulton has positions in Bitcoin, Ethereum, and Polygon. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Polygon. The Motley Fool has a disclosure policy.

3 Reasons This Is the Ultimate Cryptocurrency to Buy With $1,000 in August was originally published by The Motley Fool