Investing in Ethereum can be profitable due to the rising prices of the crypto and the massive support from influential investors like Mark Cuban. However, before venturing into cryptocurrency investments, determine the level of risk. Despite the huge market capitalisation of Ethereum, buying digital currencies can be a huge gamble since they are prone to price fluctuations. For instance, when Tesla declined the use of Bitcoin as a payment method, its price fell by 15%.
While ether has had promising returns in the past, investors have also witnessed significant crashes. For instance, in May 2021, Ethereum value was over $4,000 per coin before tanking to almost $1,800 per coin in within two weeks. Extreme volatility can cause significant losses; hence, you should only invest what you can afford to lose. Investing in Ethereum is simple, and you can join the crypto world with a few steps.
Identify the Best Cryptocurrency Exchange
Unlike stocks and mutual funds that you can buy from a brokerage account, digital currencies are not traded on major exchanges and brokerages. Fortunately, you can find crypto exchanges that facilitate buying and selling of ether. Apart from trading on crypto, most exchanges also permit buyers and sellers to exchange fiat currency for bitcoin, Ethereum or litecoin. Most exchanges offer a user-friendly and simple trading interface suitable for beginners.
Some of the major exchanges that trade in Ethereum include:
Coinbase
Coinbase is a robust exchange that permits buying and selling of Ethereum. Its simplified user interface makes crypto transactions fast and simple for beginners. Besides, Coinbase accepts deposits through Credit card, PayPal or wire transfer at favourable rates.
Coinmama
Coinmama was the first exchange to introduce credit card payments for crypto purchases. While the site is beginner friendly and the exchanges supports Ethereum exchanges, Coinmama has high fees, and you have to open an external wallet to store your coins.
CEX.io
You can also acquire Ethereum from CEX.io and enjoy the pocket-friendly fees. CEX.io also allows purchase through credit cards and bank transfers and you can easily buy or sell ether from the easy-to-use interface.
What to Consider When Choosing an Exchange
When picking an exchange, ensure they trade in Ethereum, and you can exchange fiat currency for Ethereum. Some exchanges trade in a single coin, which can be a great platform to invest if you are interested in one coin. However, if you are a crypto fiend, you want an exchange with diverse cryptocurrencies.
Crypto exchanges are also popular targets for hackers, and you may lose your coins if the exchange does not have robust security features. You can limit the risk of losing your ethereum by investing in reputable exchanges with the best security features. Also, do not forget about the transaction fees since high charges will eat into your returns. Many exchanges charge extra fees for simplifying the user interface. While the simplified interface may be ideal when learning the ropes, expert traders will prefer lower costs to increase their profit margins.
Create and Verify Your Account
After determining the exchange, open an account to begin trading. Most platforms will require personal information when creating your user interface. For instance, you must provide a driver’s licence as proof of identity and your physical address. You will also verify your email address and create a strong password for accessing the site. After the basic verification, the exchange may have additional checks like Anti-Money Laundering and Know Your Customer (KYC) that you must complete before buying or selling on the platform. Your account will be active within a few hours or several days, depending on the new account requests on the site.
Fund Your Account
When buying Ethereum for the first time, you must deposit funds into your account. Most exchanges allow buyers to deposit fiat currency (any legal tender recognised by the government) like US dollars or Sterling Pound. You can use credit card transfer, PayPal or direct deposit from your bank account to fund your ethereum purchase. Your money will reflect immediately after the transaction if you use a credit card or PayPal. However, direct bank transfers may take a few hours to reflect in your account.
Before you settle on a funding method, review the charges associated with the transfers. For instance, some exchanges like Gemini offer free wire transfers, but using a debit or credit card attracts transfer fees. Credit card purchases can also be expensive since your bank will treat them as cash advances and charge higher interest fees.
Buy Ethereum
Unlike buying regular stocks and mutual funds, which are limited to specific trading hours, you can buy Ethereum around the clock. Digital currencies are decentralised, and the trading platforms are available online, which means you can buy any day. Different exchanges have unique processes for purchasing cryptocurrencies. However, most platforms will have a ‘buy’ field where you can enter the amount you want to spend and enter the ticker symbol of the digital currency. You can buy a whole Ethereum token. If you lack sufficient funds, you can buy a fraction of the ether coin, which will earn the same returns as a whole coin. After processing your transaction, your ether will reflect in your account, and you can store it in your wallet. While you can buy ether anytime, most exchanges will limit the transaction amount.
Store Your Ethereum in a Wallet
After buying Ethereum, you need to store it securely in a crypto wallet. While most exchanges provide a crypto wallet for storing your ether coins, you can open an online wallet to avoid losing your investment if your exchange is hacked. However, most exchanges that provide wallet services insure your assets and have offline wallets to prevent thefts. Third-party wallets are either online or offline. A hot wallet, often provided by most exchanges, is connected to the internet and accessible from a phone or computer. Alternatively, you can go for a cold wallet, which is an external device without internet access. You will have to connect them to the internet before transferring your Ethereum to the wallet.
When you have an ether wallet, you enter its address to the exchange and transfer your coins securely. If you are purchasing a fraction of Ethereum, it is advisable to leave it at the exchange and avoid unnecessary transfer charges.
Selling Ethereum
Ether transactions are non-exchangeable, which means after processing the payment, you cannot reverse the transaction. However, if you want to exchange your Ethereum for fiat currency, you can sell it from your account. You will not encounter any problems when selling your crypto, but selling significant amounts of ethereum can attract taxes in some countries. Consult a tax professional before selling.
