What Is Ethereum?
Most people know Ethereum as a cryptocurrency and most investors are looking to simply buy Ethereum. However, it is more than 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 with the potential to do much more than a basic digital coin. Ethereum verifies and records transactions, allowing users to create, publish, use applications, and monetize the platform.
Ethereum is a good buy if you want to:
- Create or use decentralized applications (dApps)
- Diversify your investment portfolio
- Play Ethereum-based games
- Execute smart contracts
What Should You Consider Before You Buy Ethereum?
If you are thinking about buying in Ethereum (ETH), here are a few things to consider:
1. Market Volatility
Like BTC and other cryptocurrencies, ETH is subject to extreme volatility. Prices can rise and drop quickly with changing market sentiment, and 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.
2. Your Portfolio
Experts recommend that your cryptocurrency holdings should be about 5% of your investment portfolio and 10% if you are a risk-taker. A higher percentage means you are exposing 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.
Alternatively, you can invest 100% of your crypto portfolio in one cryptocurrency such as Ethereum, if you are a big fan.
3. How Much ETH You Can Afford
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 you buy 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. You will likely only weather the winter if you have a plan and established 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 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.
4. Your Expectations
The increase in cryptocurrency prices in the past months 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 like Ethereum has.
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 as well. Set your expectations right before you buy Ethereum.
How to Buy Ethereum
Being the second-largest cryptocurrency by market capitalization, you can find Ethereum in almost any crypto exchange. Here are the steps to buying your first ETH:
1. Get a Wallet
If this is your first time investing in cryptocurrencies, you need to get 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.
2. Identify a Trading Platform Where You Can Buy and Sell Ethereum
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 security of the platform, the location of the exchange, and the management team when evaluating the best crypto exchange to buy Ethereum. Large cryptocurrency exchanges such as Kraken, Coinbase, Bitstamp, Binance, Gemini, and Bitfinex offer Ethereum for you to purchase.
Some of the best places to buy Ethereum in Canada include; Bitbuy, CoinSmart, Satstreet, and Netcoins.
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 and therefore are ideal for more experienced traders, as opposed to beginners.
You can also 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.
3. Create an Account
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.
4. Fund Your Account
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 from one location to another by code.
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.
Is it Worth it to Buy Ethereum?
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 immediately. 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-related stocks might be a better option for you. Some of the cryptocurrency-related stocks to buy right now include; Canaan Inc. (NASDAQ: CAN), Marathon Digital Holdings, Inc. (NASDAQ: MARA), Mastercard Incorporated (NYSE: MA), PayPal Holdings, Inc. (NASDAQ: PYPL), just to mention a few.
As usual, remember to do your own research before you invest.
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