Ethereum – and its token Ether – is the second-largest cryptocurrency after bitcoin. While Ethereum presents a terrific opportunity for investors and crypto enthusiasts, there are a few things you should know and consider before you buy Ethereum.
Most people know Ethereum as a cryptocurrency. However, it is more than just a digital coin. Ethereum has multiple applications in real life and is considered a programmable blockchain. Ethereum is a blockchain network that supports the cryptocurrency Ether and allows software developers to create new decentralized applications.
Vitalik Buterin developed Ethereum in 2015 to provide a platform that can do so much more than being a digital coin only. Ethereum verifies and records transactions, allowing users to create, publish, use applications, and monetize the platform.
Ethereum can be a good buy if you want to:
If you are thinking about buying in Ethereum (ETH), here are a few things to consider:
Like Bitcoin and other cryptocurrencies, ETH is subject to extreme volatility. Prices can rise and drop quickly with changing market sentiment, unlike traditional investments, such as mutual funds. It is hard to predict price movements within the crypto market.
Before you buy Ethereum, the first consideration should be your risk tolerance. Can you handle these unpredictable price movements without losing your cool and trading emotionally? If not, it’s best to look for more conservative investments that are less volatile.
Experts recommend that your cryptocurrency holdings should be no more than 5% of your investment portfolio and 10% if you are a risk-taker. A higher percentage means you are overexposing yourself to the volatility within the crypto space and stand to lose more with price declines.
In addition to looking at your overall portfolio, analyze your crypto holdings as well. Most investors tend to invest in several cryptocurrencies. You can follow this approach by dedicating certain percentages of your crypto investments to different coins.
Cryptocurrencies are a high-risk investment. Therefore, you should only buy Ethereum with money you can afford to lose. Keeping yourself financially secure should be your goal, even as you invest in cryptocurrencies.
Before buying Ethereum, set aside an emergency fund that can support you even if you lost the entire investment. There is always a chance of experiencing a crypto winter where prices fall, and you can only weather the winter if you have a plan and financial security.
Investing more than you can afford to lose also places undue pressure on you to get your investments right, which can quickly lead to emotional trading.
Also, remember to start small and only increase your investment as you learn and develop your tolerance for risk and trading strategy.
The good thing with ETH is that you can invest in smaller quantities of the currency. Therefore, you can comfortably invest any amount you can afford and own fractions of ETH.
The increase in cryptocurrency prices has led to a lot of hype. Some buyers consider them a get-rich-quick scheme, especially with coins that have witnessed dramatic price increases as Ethereum.
Before you go all in expecting to be rich the next minute, you must understand that the crypto market is highly volatile. You could easily make a profit, but you could lose a fortune as well. Set your expectations right before you buy Ethereum.
Being the second-largest cryptocurrency by market capitalization, you can find Ethereum almost in any crypto exchange. Here are the steps to buying your first ETH:
If this is your first time investing in cryptocurrencies, you need a reliable crypto wallet to store your digital coins. Some exchanges offer wallets, while others require you to have your own wallet. A wallet you own yourself gives you more control over your funds. It is also less secure to hold your currency for a long time on an exchange.
Ethereum.org comes with a Find a Wallet feature that allows you to find wallets based on your preferences. You can choose an online (hot) storage wallet or an offline (cold) wallet.
Identifying a platform compatible with your needs is the next step after you set up your wallet. You should consider factors such as the type of currencies supported, the platform’s security, the location of the exchange, and the management team when evaluating the best crypto exchange to buy Ethereum. Large cryptocurrency exchanges like Kraken, Coinbase, Bitstamp, Binance, Gemini, and Bitfinex offer Ethereum.
You can buy or sell Ethereum on centralized and decentralized exchanges based on your preference. A decentralized exchange (DEX) allows you to buy and trade cryptocurrency directly with the buyer or seller.
Decentralized exchanges are often crypto-to-crypto exchange platforms that allow you to buy ETH with another cryptocurrency. They are complicated to use, therefore, ideal for more experienced traders.
You can choose a centralized exchange, which requires you to open a trading account with a third-party provider and deposit fiat currency or coins that you want to trade.
You can forego exchanges altogether and buy ETH from online brokerages, such as Robinhood and eToro or crypto ATMs.
Once you choose the trading platform, the next step is to create an account on the platform. The trading platform may require your name, address, and other forms of identification before allowing you to open an account on the platform.
After creating and verifying your account, you should deposit currency into your account. If you choose a platform that supports fiat currency, you can buy Ethereum with a credit card or visa card. This is the easiest way to buy Ethereum.
You can also buy Ethereum with PayPal.
If you are using a crypto-crypto exchange platform, you need to send your crypto by code from one location to another.
Once you fund your account via fiat currency or cryptocurrency, the final step is to purchase ETH and transfer your holdings to your wallet for trading.
Buying Ethereum could be a good investment as experts predict growth in the Ethereum blockchain and digital token. However, before you jump into buying Ethereum, you need to ask yourself some questions to understand what you are getting into.
While ETH is a popular cryptocurrency, you are not guaranteed profit and returns. Take your time to learn the market, your goals, expectations, trading platforms, and ways to secure your cryptocurrencies.
If you are scared of the extreme volatility inherent in crypto coins, cryptocurrency stocks might be a great option for you. As usual, remember to do your own research before you invest.