Category: Stock Market

The Digital X Ltd (ASX: DCC) share price is on the move on Friday morning. The blockchain and asset management services company announced its participation to deliver ideas for the growth of digital finance.

At the time of writing, DigitalX shares are fetching for 12.5 cents, up 8.70%. It’s worth noting that its shares are a whisker away from breaking its multi-year high of 15.8 cents reached in mid-November.

What did DigitalX announce?

Investors are fighting to get hold of DigitalX shares following the company’s latest update.

In today’s release, DigitalX advised that it has entered into a partner agreement with the Digital Finance Cooperative Research Centre (Digital Finance CRC).

Established in 2018, the Digital Finance CRC brings together companies to undertake research and commercial activities to exploit the digital finance revolution. The group consists of organisations in the finance industry, the Reserve Bank, as well as academics from numerous Australian universities.

Importantly, this allows DigitalX to collaborate with other leading companies around Australia focused on financial and blockchain technologies. This relates to innovations in digital finance, including asset tokenisation, central bank digital currency and regulatory technology.

On 30 June 2021, the Australian federal government provided $60 million to the Digital Finance CRC for digital finance research.

What does this mean for DigitalX?

Under the agreement, DigitalX will commit up to $2.5 million in cash contributions over its 10-year tenure. Around $100,000 will be handed in the current financial year, with $150,000 following in the next financial year.

The company is already looking into research projects relating to digital organisational models such as Decentralised Autonomous Organisations (DAOs). Developing this tool can provide crucial insights for real-world investment decisions, and risk and investment management strategies.

The work of the Digital Finance CRC is expected to commence in 2022.

DigitalX chief product officer, David Beros commented:

We are excited to have now partnered with the Digital Finance CRC and to join a multi-disciplined group of companies and research universities undertaking important research and commercial development of new ideas for the growth of digital finance.

Importantly for DigitalX, this provides us with the opportunity to be part of a broader group and to work with research teams to investigate and commercialise ideas that are relevant to our business that may be beyond what we could do on our own.

We look forward to bringing our own skill set to the Digital Finance CRC and making a meaningful contribution to Australian financial technology innovation over the next 10 years.

About the DigitalX share price

The DigitalX share price has gained close to 30% in the past 12 months. Its shares reached a 52-week high of 15.8 cents in mid-November, before being sold off in the following weeks.

DigitalX commands a market capitalisation of about $92.81 million, with 742.44 million shares on issue.

The post Here’s why the DigitalX (ASX:DCC) share price is leaping 9% today appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Appen Ltd (ASX: APX) share price has been among the worst performers on the ASX 200 on Friday.

In morning trade, the artificial intelligence data services company’s shares are down a very disappointing 14% to $9.98.

Why is the Appen share price being crushed today?

Investors have been selling down the Appen share price on Friday following the release of a particularly bearish broker note out of the Macquarie Group Ltd (ASX: MQG) equities desk.

According to the note, the broker has downgraded Appen’s shares to an underperform rating and cut the price target on them to $9.50.

Why did Macquarie downgrade Appen?

As mentioned above, Appen is a leading provider of artificial intelligence data services. Through its team of over one million contractors, the company provides high quality data to many of the largest tech companies in the world to help them build and improve their AI and machine learning models.

High quality data is extremely important, as without it these models will never reach their full potential.

Macquarie, however, has been speaking to industry participants and notes that there is an emerging trend which has seen some big tech companies look to bypass Appen and directly crowdsource for data annotation services.

It notes that this has been driven by tighter privacy and data retention standards, which has resulted in companies revising their strategies and developing their own crowd-sourcing solutions.

Macquarie believes this will reduce demand for Appen’s services and has downgraded its earnings and sales estimates to reflect this change, which has ultimately led to a sizeable cut in its target for the Appen share price.

Following today’s sizeable decline, the Appen share price is now down over 61% since the start of the year.

The post Appen (ASX:APX) share price smashed after broker downgrade appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Appen Ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Caspin Resources Ltd (ASX: CPN) share price is off to the races in morning trade today. It is currently up 8.66% to $1.25. However, it earlier reached as high as $1.53 — a gain of 32% on its previous closing price.

Below we take a look at the latest drilling results that look to be driving investor interest in the ASX resource explorer.

What drilling results were reported?

The Caspin Resources share price is surging after the company reported promising drill results at its Yarawindah Brook PGE-Ni-Cu Project in Western Australia.

(For the uninitiated, PGE = platinum-group elements; Ni = nickel; Cu = copper.)

Caspin also updated the market on its ongoing reverse circulation (RC) and diamond drilling operations at its Yarabrook Hill prospect.

According to the release, significant nickel and copper sulphide mineralisation was intersected at XC-22, a previously identified airborne electromagnetic (AEM) anomaly. Intersections at 1 hole included a 2-metre zone of up to 20% sulphides from 46 metres downhole.

Caspin’s CEO Greg Miles cautioned that, while it was early days, the company wanted to share the exciting visual observations at XC-22.

Commenting on the findings fuelling the Caspin Resources share price today, Miles continued:

The large size of the XC-22 anomaly suggests that if it is coincident with mineralisation throughout its entire extent then this could represent a significant body of mineralisation. Many more drill holes are required before this can be confirmed as a significant discovery and laboratory assays are required to confirm the tenor of any PGE mineralisation that may be present.

Following the promising early results, the company plans to review similar AEM anomalies in the region. According to Miles: “In light of this new information [these anomalies] are potentially significant. In addition, the remainder of the project area is about to be surveyed by AEM, commencing early in December.”

Caspin Resources share price snapshot

The Caspin Resources share price has rocketed 180% over the past 12 months. That compares to a full-year gain of 12% posted by the All Ordinaries Index (ASX: XAO).

Over the past month, Caspin shares have leapt 52% higher.

The post Here’s why the Caspin Resources (ASX:CPN) share price surged 32% today appeared first on The Motley Fool Australia.

More reading

• Does the AGL share price really offer a 14% dividend yield?
• Up 101% in a year, is the Lovisa (ASX:LOV) share price still a top reopening buy?
• Morgans names 2 exciting ASX small cap shares to buy
• Sydney Airport (ASX:SYD) investors urged to speak up or forever hold their peace
• Are Qantas (ASX:QAN) shares a top reopening buy? Here’s what Motley Fool analyst Benny Ou thinks

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There is a question worth offering – does the AGL Energy Ltd (ASX: AGL) share price really offer a 14% yield?

If that’s the case, it would be a yield that’s quite a bit higher than other blue chips like Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC) or Telstra Corporation Ltd (ASX: TLS).

When looking at the last 12 months of dividends and the current AGL share price, the yield does come to around 14%.

As readers may have noticed, AGL shares have declined significantly over the last year. It’s actually down by 62%. So, that has significantly increased the trailing AGL dividend yield.

But the key question is, what is the next 12 months of dividends going to be?

AGL dividend estimates

The trouble is, many analysts don’t think the dividend isn’t going to stay as high as it has been.

In-fact, they are expecting the dividend to be more than halved.

For example, Morgan Stanley thinks the AGL dividend is going to sink to $0.35 per share in FY22. That would mean a forward dividend yield of 6.5%.

It’s the same thing from UBS, the analysts there are expecting an even lower dividend in FY22 of just $0.31 per share. This annual dividend would be a yield of just 5.75% at the current AGL Energy share price.

What’s going on with the AGL dividend?

AGL Energy’s dividend policy has been to target a dividend payout ratio of 75% of underlying profit after tax.

The business has been experiencing a decline of profit, so the dividend has been dropping as well.

In FY21, AGL Energy’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 18% to $1.67 billion. The underlying profit after tax dropped by 34% to $537 million which included around $90 million of insurance receipts relating to the Loy Yang Unit 2 outage in 2019.

The company experienced several headwinds in FY21 such as lower wholesale electricity prices, reduced electricity generation output at peak periods, and the roll-off of legacy supply contracts in wholesale gas.

But AGL is expecting more profit declines in FY22. Management is expecting underlying EBITDA to come in a range of between $1.2 billion to $1.4 billion. That would be a decline of 16% to 28%.

Meanwhile, FY22 underlying profit after tax is expected to be in a range of between $220 million to $340 million. This would lead to a decline of between 37% to 59%. Keeping the same dividend payout ratio, that’s the level of dividend cut that shareholders may need to expect.

Profit expectations can have an important impact on the AGL share price when it comes to investor thoughts on the valuation.

Demerger

AGL continues with its demerger. The company says that it’s progressing well with its plan to implement the proposed demerger in the fourth quarter of FY22, subject to various approvals.

The two businesses (Accel Energy and AGL Australia) continue to progress towards finalisation and structure of funding requirements and will adopt financial policies consistent with the maintenance of an investment grade credit rating.

The post Does the AGL share price really offer a 14% dividend yield? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Lovisa Holdings Ltd (ASX: LOV) has been a strong outperformer over the past 12 months.

The Lovisa share price is up 101% since this time last year, closing yesterday at $20.80 per share.

October’s executive shakeup failed to derail the Lovisa share price

Even the announcement that its veteran CEO, Shane Fallscheer, was stepping down following 12 years at the helm of the ASX fashion retailer wasn’t enough to stop the share from marching higher.

Lovisa made that announcement after market close on 12 October, when it also reported that experienced retail executive Victor Herrero would be taking Fallscheer’s place.

The Lovisa share price is up 10% since then.

With the strong run higher already banked as Australia moves to fully reopen for business following lengthy COVID lockdowns, is Lovisa still a leading reopening buy?

Is the ASX fashion retailer still a top reopening buy?

For the answer to that question, we turn to 2 leading experts – Ausbil Investment Management’s Arden Jennings and Wilson Asset Management’s Tobias Yao.

The fund managers discussed the ASX shares they believe will outperform with LiveWire.

Here are some key takeaways they had to say about their outlook for the Lovisa share price along with the company’s new CEO.

“Lovisa is a buy for us,” Yao said. “We’ve always really liked the store economics of the business and the vertical integration makes it one of the most nimble brick and mortar retailers.”

Yao added:

It is exposed to the reopening theme with more people going out and attending events and parties. We like the new CEO. If you look at his long-term incentive structure, some of the hurdles that they have for him is going to show very strong growth over the coming years.

Despite the Lovisa share price rocketing over the past year, Jennings also has a bullish outlook for the company.

“It’s a buy for us too,” he said. “It’s a high conviction position in both the Ausbil Australian Small Cap Fund and MicroCap Fund.”

According to Jennings:

Lovisa has over 550 stores operating in 21 markets globally. But the new CEO, Victor, comes with a formidable track record… And Lovisa is really the fast fashion for jewellery and expanding globally. So where their current store footprint is at the moment, and where some of those global businesses have gone to thousands of stores, we think the market’s probably pricing in between 1,000 and 1,500 stores. We think personally, they can go well beyond that with their global rollout strategy. So, it’s a buy.

There you have it.

The Lovisa share price may have doubled over the past year, and indeed gained 417% since the 20 March 2020 pandemic selloff lows, but these 2 experts still see it as a buy.

The post Up 101% in a year, is the Lovisa (ASX:LOV) share price still a top reopening buy? appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Yesterday I looked at two small cap ASX shares that are rated highly right now. You can read about them here.

If you’re a fan of small caps, then you’re in luck. Because those aren’t the only small cap shares that analysts are recommending.

Here are two small cap ASX shares tipped for big things by analysts at Morgans:

Airtasker Ltd (ASX: ART)

The first small cap ASX share to consider is this growing online marketplace for local services.

Analysts at Morgans are very positive on Airtasker due to their belief that the company has a very attractive business model.

The broker notes that the company’s product works for both sides of the marketplace, has attractive unit dynamics with healthy gross and contribution margins, an enormous total addressable market (TAM) in the early stages of ecommerce adoption, and a large international expansion opportunity. The latter provides the company with a long growth runway in the future.

In light of the above, Morgans has put an add rating and $1.27 price target on the company’s shares.

Step One Clothing Limited (ASX: STP)

Another small cap ASX share to watch is Step One. It is a recently listed direct-to-consumer online retailer of men’s underwear.

Earlier this month the company raised $81.3 million via its IPO. Some of these proceeds will be used to support the company’s growth strategies. This includes growing Step One’s existing customer base in Australia and the UK and investing in establishing a presence in the enormous US market.

Morgans is also feeling bullish on Step One. It recently initiated coverage on the company’s shares with an add rating and $3.20 price target. The broker likes Step One’s organically grown bamboo fabric design and notes that its sales have been growing rapidly in Australia and the UK.

Pleasingly, it doesn’t expect this growth to stop any time soon. Particularly given its recent launch in the US and the broker’s belief that Step One has the potential to go global.

The post Morgans names 2 exciting ASX small cap shares to buy appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Airtasker Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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As the takeover of Sydney Airport (ASX: SYD) draws closer, investors of Australia’s largest airport operator are being prompted to speak up or likely forever hold their peace.

The suggestion to make any discontent with the buyout known in court has come from the Australian Shareholders Association (ASA). Importantly, the ASA wants small investors not to simply assume that the proposed takeover is a done deal.

Making sure smaller voices are heard

Less than two weeks after private shareholder Joe Cambria voiced his disappointment with the $23 billion takeover offer, the ASA is now giving investors the nudge to make their grievances known. In the case of Cambria, he believes that the airport is worth $12 per share, rather than the proposed $8.75 being offered by the consortium of buyers.

According to ASA, investors should read the scheme booklet carefully once issued. From there, any misaligned details could have the potential to be argued at court.

While the likelihood of a takeover being overturned by the court is low, it is possible. However, it would likely require minority voters to uncover a flaw within the takeover process.

To deliver such a blow, minority shareholders would need to put together an additional independent report. For Michael Pinn, a Sydney Airport investor, this would be an expensive task — though it was still in the realm of possibilities.

Speaking directly to investors of the ASX-listed Sydney Airport via email, ASA said:

The meeting is your opportunity to have your say and if you want to affect the outcome you need to submit a vote for or against the scheme.

Furthermore, shareholders should receive the Sydney Airport scheme booklet roughly a month before the vote is held.

ASX-listed Sydney Airport takeover already on regulator’s radar

In addition to retail investor concerns, the Sydney Airport deal has also gained the attention of regulatory bodies. As my colleague Brooke previously covered, the Australian Competition and Consumer Commission (ACCC) has already begun its review process.

Furthermore, the corporate watchdog is particularly concerned about the ownership structure post-takeover. This might be due to the consortium’s existing part ownership in Melbourne Airport and Brisbane Airport.

Suggestions have been made by the ACCC for the separation of ownership from within the acquiring entity. If the consortium fails to abide by the regulator’s advice, the takeover might come to a screeching halt.

Shares in Sydney Airport on the ASX are up 31% since the start of the year.

The post Sydney Airport (ASX:SYD) investors urged to speak up or forever hold their peace appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Australia has officially reopened and the flying kangaroo is already hitting tarmac across the globe. Does that mean Qantas Airways Limited (ASX: QAN), and its share price, is in for a strong run in the near future?

Well, maybe, but maybe not. Motley Fool Australia analyst Benny Ou sat down with our chief investment officer Scott Phillips to discuss the pros and cons of investing in Qantas earlier this month.

Interested readers can find the pair’s conversation in full here and more content from The Motley Fool Australia on our YouTube channel. Or, keep reading for a breakdown of Ou and Phillips’ conversation on Qantas.

At the time of writing, the Qantas share price is $5.17, down 2.17%.

The bull view on Qantas shares

After plunging around 60% at the height of the COVID-19 pandemic, the Qantas share price has taken off towards recovery.

As Ou points out, Qantas navigated the pandemic relatively well. It also has a strong brand, is recognisable, and generally liked by customers

Additionally, now the worst of the pandemic is seemingly behind us, Qantas has emerged a leaner organisation than it was before.

Qantas has cut costs and plans to cut more. It has also bolstered its balance sheet with an $802 million land sale.

The airline also has a wild card in its back pocket. The company’s Frequent Flyer loyalty program has continued to grow throughout COVID-19. Ou commented:

This division makes money by selling airline loyalty points to your banks, your retail partners, utility providers, and airlines… But what’s interesting is that, prior to the pandemic, in 2019 the loyalty division actually generated more in underlying earnings than [Qantas’] international segment…

I think it will likely rebound and become the crown jewel of the business.

On top of that, Ou notes Qantas has a hold of around 70% of Australia’s domestic flight capacity and Australians, in general, have more cash to splash post-COVID than they did pre-COVID.  

He said Australia’s household savings ratio is just below 10%, compared to its pre-pandemic levels of around 5% to 6%.

And finally, in what could be seen as both a good and a bad sign, Qantas’ market capitalisation is currently sitting near its record high.

The potential downside to investing in Qantas

Unfortunately, there are several factors Ou pointed to that could weigh on Qantas shares in the future.  

Firstly, the airline is subject to a plethora of external factors that could affect its profitability.

COVID-19 is one example. Others include geopolitical risks, terrorism, natural disasters, and – perhaps most notable – oil and fuel prices. Ou stated:

Its financial performance is actually strongly exposed to, but also strongly dictated by, commodity prices, and what you’ve probably been seeing in the news is rising jet fuel prices or rising Brent oil prices…

I think, if these prices remain elevated… Qantas has to either fork out more and absorb the costs or they might actually charge customers via higher fares, which I think is a very, very difficult balancing act.

There is also emerging competition in Australia’s domestic market.

Regional Express Holdings Ltd (ASX: REX) has recently crept into Australia’s ‘golden triangle’, offering daily flights between Melbourne, Sydney, and Brisbane. Meanwhile, budget domestic airline Bonza is planning to launch in 2022.

More competition could put pricing pressure on Qantas.

Speaking of pricing, Qantas doesn’t have much power over it. Ou said:

As an airline, [Qantas] has limited to no pricing power. And what i mean by that is that a lot of the pricing and costs are dictated by the airports, as well as the changes in demand from consumer and business travel.

To top off his bearish argument, Ou noted the travel industry could take longer to recover than potentially expected:

In my personal view, I think global aviation will actually take years to fully recover…

Despite the pent-up demand that we’re seeing, I think people will likely have a more of a wait-and-see approach and I think the rebuilding of confidence to travel internationally will take some time.

So, will Qantas be a market beater?

Unfortunately, Ou is bearish on the Qantas share price over the next 5 or so years.

He noted that, currently, the Qantas share price seems to be driven by sentiment. Investors appear to be assuming it will increase once travel returns to normal.

Additionally, while the company’s share price remains lower than it was pre-COVID, the company has more outstanding shares. Thus, Qantas’ market capitalisation has already seemingly recovered.

Finally, Ou looked to Qantas’ past performance:

Historically, Qantas has been extremely unpredictable. It’s actually lost money [in] 3 out of [the last] 10 ten years on an operating basis…

Over the last 5 years of Qantas in pre-COVID levels, it was actually profitable between 2015 to 2019, and if we take the average earnings then you’re getting around $1.3 billion in underlying earnings during that period. If you deduct or adjust your interest and tax you get around $800 million. So, you’re kind of looking at around 14 times net profit after tax, which doesn’t seem quite attractive…

Overall, I think that it will [lag] the index and I think there are better opportunities out there that have a higher chance of beating the market.

The opinions expressed in this article were Phillips and Ou’s as at November 2021 and may change over time.

The post Are Qantas (ASX:QAN) shares a top reopening buy? Here’s what Motley Fool analyst Benny Ou thinks appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking for exposure to the resources sector, then BHP Group Ltd (ASX: BHP) shares could be the way to do it.

This is because the team at Morgans see plenty of upside for the BHP share price and big dividends in the near future.

What did Morgans say about the BHP share price?

According to a note from this week, the broker has retained its add rating but trimmed its price target on the mining giant’s shares slightly to $45.70.

Based on the current BHP share price of $38.62, this implies potential upside of over 18% for investors.

It gets even better, with Morgans forecasting a fully franked dividend of $3.40 per share in FY 2022. This represents a yield of 8.8%, bringing the total return on offer here to approximately 27%.

Why is Morgans bullish?

Morgans notes that BHP has signed a share sale agreement with Woodside Petroleum Limited (ASX: WPL), with the proposal to merge their two petroleum businesses now binding.

This is just one of a number of big moves BHP has made in recent years, which Morgans believes supports the view that Mike Henry was appointed for his vision, not just his operational chops. It notes that BHP has moved decisively to exit coal (ex-BMA) and oil and gas, while pushing ahead with the construction of Jansen (potash).

And while the broker highlights that these are strategic exits from some difficult commodities, the divestments have blunted BHP’s growth profile and reduced diversification. As a result, Morgans believes BHP will soon add to its operations through acquisitions.

It commented: “We do not think this is the last move, and expect BHP to continue to move its portfolio to add further base metal growth options. As a base case we expect more acquisitions of development-ready copper/nickel projects (like Norront Resources), while we see more aggressive M&A of existing miners also a realistic scenario.”

Overall, the broker sees plenty to be positive about and continues to rate its shares highly.

Morgans concluded: “We see BHP as best placed to take advantage of current varying commodity cycles and maintain our Add recommendation.”

The post Is the BHP (ASX:BHP) share price great value today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Cryptocurrency assets are flashing signs of weakness in the latter half of November, with the market’s total valuation dropping around 10% to $2.5 trillion in the last 15 days. But the sector’s long-term outlook is still strong as investors look for an alternative to fiat currencies amid rising inflation and low interest rates in developed economies.

Let’s explore how Ethereum (CRYPTO: ETH) and Aave (CRYPTO: AAVE) can benefit from these favorable long-term trends. 

1. Ethereum 

Ethereum is the first blockchain network designed to create self-executing programs called decentralized applications (dApps). These dApps expand the potential of cryptocurrency outside of just storing and transmitting value. With a first-mover advantage and scalability upgrades on the horizon, Ethereum is still an excellent bet for investors. 

In a loosely regulated industry like cryptocurrency, trust is everything. And Ethereum’s six-year history and $500 billion market cap (20% of the entire market) make it the crypto equivalent of a blue-chip company. This brand recognition helps it stay relevant, even as rivals like Solana (capable of handling 50,000 transactions per second, compared to Ethereum’s 15) surpass it in scalability.

But Ethereum isn’t resting on its laurels. Its blockchain aims to transition from its current proof-of-work (miners solve puzzles to verify transactions) to a proof-of-stake (PoS) system wherein transactions are verified using existing tokens. Ethereum founder Vitalik Buterin claims that the upgrades, dubbed Ethereum 2.0, could send the network’s transaction capacity as high as 100,000 per second.

It is unclear when Ethereum 2.0 will go live, but the developers are making progress. In October, the network completed its Altair update, which is designed to help introduce a PoS system.

2. Aave

Unlike Ethereum, which is an independent blockchain, Aave is a dApp programmed on Ethereum. It offers crypto-related financial services without a centralized intermediary. And it looks poised for long-term success because of its utility for cryptocurrency investors. 

Passive income is hard to find in this economy. According to the FDIC, the average annual percentage yield (APY) on savings accounts is just 0.06%. And many public companies prefer to reinvest their profits or repurchase shares instead of paying a meaningful dividend. This lack of generous yields creates an opportunity for Aave, allowing users to earn interest (undertaking exchange-rate risk) on their cryptocurrency holdings by lending them to other users through liquidity pools — a “bank” of digital assets from which the borrowers can draw.

Aave’s deposit yields can hit double digits for less-liquid assets. But popular stablecoins (cryptocurrencies pegged to fiat currency) like DAI and Gemini Dollar boast APYs of 2% to 3%. As an Ethereum-based dApp, Aave faces the same challenges as Ethereum with transaction capacity and fees. But investors should expect the platform to get a boost as the Ethereum 2.0 upgrades go live. 

Investing for the long term 

Cryptocurrencies are notoriously volatile. But Ethereum and Aave look likely to outperform over the long term because of their strong fundamentals. In addition, both assets have early-mover advantages and will benefit from the Ethereum 2.0 upgrades, making them top choices for investors will a long-term horizon. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 top cryptocurrencies to buy and hold forever appeared first on The Motley Fool Australia.

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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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