5 Essential Things You Should Know When Buying Ethereum
This is not financial advice. Cryptocurrency is unregulated in the UK; profits may be subject to tax; and the value of any investment could fall.
You have probably heard about Ethereum; more now than in the last few years. Ethereum is the second-largest cryptocurrency in terms of global market capitalization. Since its launch in 2015, it has grown in value and usage around the world.
So what exactly is this Ethereum, and why is everyone talking about it? How can you purchase it? Why is it so valuable to the people who trade it and to people who use the platform?
Below, we give you tips for buying Ethereum and explain its value and why you should trade the currency.
5 Tips for buying Ethereum
Investing in Ethereum may be easier than you think. Here’s how to get started in just five steps:
- Determine your level of risk
The first thing to do is understand the level of risk it takes to buy cryptocurrency, then decide if you’re ready for it. While you might have heard that trading crypto is an easy money-making scheme, it can be quite a gamble sometimes.
Just like most other investments, cryptocurrencies can be subject to price fluctuations and other variables. But, of course, those variables may be in your favor. For example, recently in January 2021, the price of Bitcoin rose incredibly.
However, after a few tweets by Elon Musk, Bitcoin’s value dropped drastically. So, in March 2021, the world’s biggest Ethereum sale took place — the sale of 5000 Days by Christie’s auction house.
This news was instrumental in increasing Ethereum’s visibility. Also, even though Ether has done some excellent numbers in the past, it has had some crashes. So you would need to decide that you’re on it for the long haul.
If you have little to no risk tolerance, you know that Ethereum should only make up a small part of your investment portfolio.
You must never invest more than you can afford to lose in cryptocurrency and Ether. It is not a get-rich-quick scheme, and you should approach it after careful consideration.
- Get started
To do this, you would need to do two things: select an exchange and create an account:
i. Selecting an exchange
To buy Ether, you need to take a few steps on your own. Unlike other investment vehicles, you cannot buy Ether by merely purchasing it through your brokerage account.
You will not find Ether on any major traditional exchange such as the New York Stock Exchange. In addition, your regular financial advisor, if you have one, might not be able to source Ether for you also.
Instead, you would need to find a crypto exchange like Moonpay or Coinbase to buy Ether. Crypto exchanges allow you to exchange fiat currency like dollars with cryptocurrencies like Ether or Bitcoin.
When choosing a currency exchange, you should find one that makes the purchase process easy for you. In addition, most of them have a clean, simple interface for new users.
You should also ensure that the crypto exchange you choose offers you the option of using a crypto wallet to store your investments. This is because you might have to get one separately from your exchange platform if your exchange platform does not offer you this service.
ii. Creating an account
After you have selected a trading platform that suits your needs, you need to open an account. If you are familiar with opening an account on a brokerage platform, this is not very different.
You will need to provide some personal details, including the following: your name, address, social security number, forms of identification, etc. In addition, you should confirm that the site you have chosen is legitimate to avoid getting duped by a fraudulent website.
After you finish creating your account, the next step is to verify your account. Different exchanges have different means of verification. You would need to upload information that they can use to verify your identity.
They do this to ensure that you are not fraudulent. Verification can take between one hour to one day, depending on the exchange you use.
- Fund your account
After you have gotten the above steps out of the way, you need to fund your account. Most exchanges allow you to deposit money from your personal savings or checking account.
You would also be able to fund your account using wire transfers, debit cards, or using PayPal and some other accounts on fintech apps.
It is essential that you carefully examine the crypto exchange’s fees when choosing a funding method. You would find that the prices might vary by funding method. Therefore, you would want to select a method that is convenient for you but is also cost-effective.
If you’re using a C2C exchange, it might be difficult to deposit money. This is because you would need to send your Ether by code from one location to another. This will take a bit longer to complete.
Also, when you use an exchange that allows you to fund your account using your credit card, you should be careful before choosing this method. This is because most credit card companies consider crypto purchases as cash advances.
As such, you might have to pay a higher interest rate than usual as well as a cash advance fee. When you add these to the crypto exchange’s prices, you might find that the charges are too many.
You can invest as little as $5 or as high as you would like. However, it is advisable to trade large amounts at once because of the fees charged per trade.
- Buy Ethereum
After you have deposited fiat currency, you can now begin trading. However, unlike stocks, mutual funds, and other regular investments, there are no market hours for cryptocurrency trading.
While Nasdaq can only trade from 9:30 a.m. until 4:00 p.m. ET, and there are certain days where the exchange is closed, cryptocurrency exchanges are always open. You can trade Ether every day, any time.
While each exchange has a different interface, you should give it enough time to confirm transactions and for the transactions to process. For example, to buy Ethereum, input its ticker symbol, ETH, in your exchange’s Buy field. Then enter the amount you are purchasing.
You do not need to buy a whole ETH coin; you can purchase a fraction of one if you do not have enough money or are not ready.
- Withdraw ETH into a wallet
After you process your purchase, you would need to store your ETH somewhere. However, if you have chosen an exchange platform that can keep it for you, you have nothing to worry about.
Most exchanges insure your holdings and store their assets offline to prevent theft. Also, most exchanges that have been hacked have reimbursed losses. However, some people still prefer to store their crypto in independent wallets.
You could also choose to use a third-party wallet to guarantee its safety. For example, you could use one of these two types of wallets:
- Hot wallet: This is usually connected to the internet. You can access it using your computer or your phone. Hot wallets are convenient and provided by crypto exchange platforms.
As these wallets are connected to the internet, they are still at a higher risk of hacking or security breaches.
- Cold wallet: On the other hand, cold wallets are external crypto storage wallets. They are not connected to the internet and are at less risk of security breaches. They could cost as low as $50 and as high as $500, depending on the version.
You would have to connect them manually to the internet every time you want to access your Ethereum. However, they are much safer than hot wallets, and you might want to use them if you have a sizable amount of Ether.
Why does Ethereum have so much value?
It’s okay to wonder why a currency you cannot see, touch, or feel has so much value. Ether is built on the blockchain platform, Ethereum. Anytime you buy Ethereum, you’re converting your fiat currency (USD) into Ether (ETH).
To use the Ethereum blockchain, you would need to pay a transaction fee. However, Ethereum is growing in value because the blockchain uses a technology that makes many things possible.
You can use Ethereum to send ETH as a form of payment, but you can also use it to run several applications. These applications are called decentralized apps (Dapps).
Decentralized applications are applications that are built independently on the Ethereum blockchain. They cut out intermediaries and run on something called smart contracts.
To run these applications, you would need to pay in Ether for the cost of gas. Gas is a measurement of the computing power used to run the application.
While this is still relatively new technology, these are examples of the current Dapps: online gaming, marketplaces for non-fungible tokens (NFTs), insurance, payments, music streaming, etc.
When you invest in Ethereum, you are doing it, hoping that people will continue to use Dapps for different activities. This will drive demand for ETH higher and ensure that you make money.
Conclusion
Ethereum is increasing in value as time progresses. As such, you might want to take the tips we have offered you to purchase Ethereum for yourself. Choose an exchange that suits your needs, buy Ethereum, and get started!