How To Buy Ethereum
Based on the value of its coins in circulation, Bitcoin is the most valuable cryptocurrency, but Ethereum is not a slouch either. It is the second most popular cryptocurrency, with a market worth of over $232 billion, and is backed by corporate moguls like Mark Cuban.
Additionally, it has been a successful investment decision. In August 2015, a $1,000 investment in Ethereum would have grown to an astounding $2.23 million, almost six years later.
Here is a guide on how to begin purchasing Ether, the token’s actual name but one that is more frequently referred to as Ethereum due to its connection to the Ethereum network.
How to Buy Ethereum
It could be simpler than you imagine to invest in Ethereum. Here are the first five steps to getting started:
1. Determine Your Level of Risk
There is no getting around the fact that purchasing Ethereum might be risky. While there is some risk involved with every investment, cryptocurrencies are particularly susceptible to price changes. Just consider the impact a few hundred characters may have on the price of a cryptocurrency: For example, after Elon Musk tweeted that Tesla would no longer accept Bitcoin as payment, the value of the coin dropped 15%.
Ether has historically had both remarkable gains and catastrophic falls, often in quite brief periods of time. Notably, the price dropped from a peak of about $4,000 per coin in May 2021 to around $1,800 in June 2021. If you had invested at the peak, a month later you would only have half the value. That’s a really high level of volatility.
Therefore, before purchasing ether, it’s crucial to take into account your risk tolerance as well as the diversification and stability of the remainder of your investment portfolio. Never spend more in cryptocurrency than you can afford to lose, according to experts.
2. Choose a Crypto Exchange
When compared to purchasing stocks or mutual funds through your existing brokerage account, purchasing ether is a little more difficult. Major exchanges like the New York Stock Exchange (NYSE) do not now allow cryptocurrency trading, and many brokerages do not currently provide cryptocurrency investment.
Create an account on a cryptocurrency exchange before you may purchase cryptocurrency. Practically, it is identical to the brokerage systems you may be more accustomed to: Buyers and sellers can trade dollars or other fiat currencies for cryptocurrencies like Ethereum, Bitcoin, or Dogecoin on cryptocurrency exchanges. Take a look at our list of the top cryptocurrency exchanges if you don’t already have one in mind to locate the one that’s perfect for you. Most exchanges have a straightforward purchasing interface for new users, even if it could have greater costs than their trading platform. However, other exchanges have more complicated trading platforms.
Several important points: Make sure the exchange you choose has a crypto wallet available for you to keep your assets. The great majority do, but you’ll need to acquire one of your own if yours doesn’t.
Additionally, you may always utilize a site like Cash App or Robinhood if you’re a genuine newbie. Your ability to buy cryptocurrencies will be more streamlined as a result, but there is a downside: You cannot withdraw your Ethereum investment and store it in a different wallet or use it to make online transactions. If you use one of these streamlined sites, your cryptocurrency can only be exchanged on the platform where you purchased it. So, in order to store it in a different wallet, you would need to withdraw money from that platform and then repurchase it on a cryptocurrency exchange.
3. Fund Your Account
You must fund your account before you can purchase Ethereum through a cryptocurrency exchange. You will often deposit money from a bank account, such as your individual checking or savings account. In general, you can also deposit money through PayPal, make wire transfers, or use a debit card.
Review the costs associated with the crypto exchange before picking a financing option; they might differ depending on the method. For instance, although debit card transactions on Gemini are free, wire transfers cost 3.49% more.
One word of caution: A credit card may be used to purchase cryptocurrencies on some platforms. Although it could seem alluring, credit card providers often view bitcoin transactions as cash advances. In addition to the costs charged by the cryptocurrency exchange, your card may charge you a higher interest rate and a cash advance fee.
4. Buy Ethereum
The market hours restrict your ability to purchase stocks, mutual funds, or exchange-traded funds (ETFs). For instance, the Nasdaq market is closed on weekends and some holidays and has trading hours of 9:30 a.m. to 4:00 p.m. ET.
Ethereum and other decentralized cryptocurrencies operate substantially differently in that you may purchase and sell them whenever you want.
To acquire Ethereum, enter its ticker symbol, ETH, in the exchange’s “buy” section along with the desired purchase amount. You can buy a portion of an Ethereum token if you don’t want to buy a whole one or don’t have enough funds in your account to do so. If Ethereum costs $2,000 and you pay $100, for instance, you will buy 5% of an Ether currency. This is comparable to buying a fractional share of stock.
5. Store Your Ethereum
You must keep your cryptocurrency after the processing of your Ethereum purchase. Certain individuals choose to keep their assets personally to lessen the chance that they would lose their cryptocurrency to a hack, even if some sites will do it for you. This is reasonable, but it’s also crucial to keep in mind that the majority of significant exchanges do guarantee the holdings of their customers and frequently store the majority of their assets offline to prevent significant theft. Furthermore, in the past, exchanges that were hacked have paid up any losses.
But if you want your cryptocurrency to be secure, you may select between two different kinds of third-party wallets:
- Hot Wallet: A hot wallet may be accessed from a computer or smartphone and is linked to the internet. They’re practical and typically offered at no extra cost by bitcoin exchange platforms, however you may also use your own if you choose to keep your cryptocurrency off of the exchange. They are more vulnerable to security breaches since they are still linked to the internet.
- Cold Wallet: In contrast, cold wallets are external, totally unconnected devices. They typically cost between $50 to $200 depending on the model you select, however there are even more costly variants available. Although you have to manually connect cold wallets to the internet each time you want to access your cryptocurrency, they are safer than hot wallets and may make sense if you hold a sizable quantity of Ethereum or other cryptocurrencies.
How to Sell Ethereum
Simply return to your cryptocurrency exchange and input the desired selling amount to sell your Ethereum.
However, if you’re selling a significant quantity of cryptocurrency, you might want to speak with a tax expert. Cryptocurrency is taxable in the perspective of the federal government despite being decentralized. The earnings from the sale are often subject to capital gains taxes, which can have a big impact on how much money you owe the IRS when tax season rolls around.
Should You Invest in Ethereum?
With more than 116 billion coins already in the hands of investors, Ethereum is quite well-liked. However, just because a cryptocurrency is well-known doesn’t always imply you should utilize it.
Make sure you’ve done your research and your finances are in order before purchasing a risky investment like Ether. Your retirement accounts should be fully funded, you should have little debt, and you should have a sizable emergency fund. Even if you can check all those boxes, you should diversify your portfolio by placing Ethereum and other cryptocurrencies only in a small fraction of your overall investments.