If bitcoin is the first cryptocurrency based on the value of its coins in circulation, Ethereum is no slouch. With a market capitalization of over $331 billion, it is the second largest form of cryptocurrency and has the support of business leaders like Mark Cuban.
What’s more, this investment choice has proven to be profitable. If you invested $1,000 in Ethereum in August 2015, your investment would be worth a staggering $2.23 million almost six years later.
Here’s how to start buying Ether, the official name of the token more commonly known as Ethereum due to its association with the Ethereum platform it powers.
How to buy Ethereum
Investing in Ethereum may be easier than you think. See the article: Ethereum Price Prediction: Find out here when ETH price could break back above $3,000. Here’s how to get started in just five steps:
1. Determine your level of risk
There is no denying it, buying Ethereum can be a gamble. While all investments carry some risk, cryptocurrencies are particularly vulnerable to price fluctuations. This may interest you: Bitcoin (BTC) drops sharply as $126 billion disappears from the cryptocurrency market!. Just think of the impact a few hundred characters can have on the price of cryptocurrencies: After Elon Musk announced on Twitter that Tesla would no longer accept bitcoin payments, for example, the value of the currency fell by 15%.
Although Ether has had impressive returns in the past, it has also experienced significant crashes, sometimes in surprisingly short timeframes. Notably, it fell from a high of nearly $4,000 per coin in May 2021 to under $1,900 in June 2021. If you had bought the coin at its all-time high, you would end up with half that value a month later. That’s pretty extreme volatility.
This is why it is important to consider your risk tolerance as well as the diversity and stability of the rest of your investment portfolio before buying Ether. Experts recommend never investing in cryptocurrencies more than you can afford to lose.
2. Choose a Crypto Exchange
Buying Ether is a bit more complicated than buying stocks or mutual funds through your current brokerage account. Read also: Cryptocurrencies are winning, and bitcoin diehards are furious.. Cryptocurrencies are not traded on major exchanges like the National Stock Exchange (NSE), and many brokers do not offer cryptocurrency investing.
To buy crypto, you must first create an account on a stock Exchange of cryptocurrencies. In practice, it’s just like the brokerage platforms you may be more familiar with: Cryptocurrency exchanges allow buyers and sellers to exchange fiat currencies – like the dollar – for cryptocurrencies. such as Ethereum, Bitcoin or Dogecoin. If you don’t have a cryptocurrency exchange in mind yet, check out our list of the best cryptocurrency exchanges to find the right one for you. Although some exchanges’ trading platforms become complex, most offer a simple buying interface for beginners, although it may charge higher fees than their trading platform.
A few key points: When choosing an exchange, make sure they offer a cryptocurrency wallet to store your investments. The vast majority do, but if yours doesn’t, you’ll have to get one yourself.
And if you are a real beginner, you can always use a platform like CoinDCX and WazirX. This will greatly simplify the process of buying cryptocurrencies for you, but it has a hidden cost: You cannot withdraw your Ethereum investment to put it in a third-party wallet or use it to pay for online purchases. If you use one of these simplified platforms, your crypto will only be able to be traded on the platform where you purchased it. You will therefore have to withdraw your money from this platform and then buy it back on a cryptocurrency exchange to keep it in a separate wallet.
3. Fund your account
Before you can buy Ethereum through a cryptocurrency exchange, you need to fund your account. In most cases, you will deposit money from a bank account, such as your checking account or personal savings account. You can also usually make wire transfers, use a debit card, or deposit money through netbanking.
When choosing a funding method, consider the fees of the cryptocurrency exchange; they may vary depending on the method. For example, bank transfers are free on CoinDCX, but the platform charges 0.5% on net banking.
4. Buy Ethereum
When you buy stocks, mutual funds, or exchange-traded funds (ETFs), you are limited by market hours. For example, the NSE’s trading hours are 9 a.m. to 2 p.m., and the exchange is closed on weekends and some holidays.
Cryptocurrencies like Ethereum work very differently: Because they are decentralized currencies, you can buy and sell them around the clock.
To buy Ethereum, enter its ticker symbol – ETH – into the “buy” field on your exchange and enter the amount you want to buy. If you don’t want to buy a whole Ethereum token or you don’t have enough money in your account for a full coin, you can buy a fractional coin. For example, if the price of Ethereum is $2,000 and you invest $100, you will buy 5% of an Ether coin. It’s just like buying a fractional share.
5. Store your Ethereum
Once your Ethereum purchase has been processed, you need to store your cryptocurrency. While some platforms do this for you, some people choose to store their investments themselves to reduce the likelihood of losing their cryptocurrency to a hack. This is understandable, but it’s also important to note that most major exchanges insure their clients’ holdings and often store the majority of their assets offline to prevent mass thefts. Also, historically, exchanges that have been hacked have reimbursed any losses.
But if you want peace of mind about your cryptocurrencies, you can choose to transfer them to one of two types of third-party wallets:
How to sell Ethereum
To sell your Ethereum, simply return to your cryptocurrency exchange and enter the amount you wish to sell.
However, if you are selling cryptocurrencies, you should consult a tax professional. Despite its decentralized nature, crypto is taxable in the eyes of the federal government. The profits you make from the sale are usually subject to capital gains tax and can significantly affect the amount you owe the IT department at tax time.
Should you invest in Ethereum?
Ethereum is hugely popular, with over 116 billion coins currently in the hands of investors. But just because it’s one of the best-known cryptocurrencies doesn’t mean it’s right for you.
Before buying a volatile investment like Ether, you need to make sure that you have done your research and that your finances are in good shape. Ideally, you should have a large emergency fund, maximize your retirement accounts, and have minimal debt. While you can tick all of these boxes, it’s important to diversify your portfolio, so only a portion of your investments should be in Ethereum and other cryptocurrencies.
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