Ethereum is a popular cryptocurrency that has gained traction in recent years due to its growing popularity and usability. From dApps, decentralized finances, loans, and NFTs, Ethereum has stormed the cryptocurrency scene and has run over as the 2nd largest coin right after the mother coin, Bitcoin.
In order to invest in Ethereum, you will need to purchase some Ether tokens and set up a digital wallet. There are several ways to invest in this cryptocurrency, from buying and holding Ether to actively trading on exchanges or participating in joining the mining pool that utilizes the Proof-of-Stake mechanism.
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What Is Ethereum?
Have you ever wondered why Ethereum has grown so fast? It’s because of the utility and potential Ethereum would offer to investors in the future.
But what exactly is Ethereum?
Ethereum is a decentralized global software platform powered by blockchain technology. It is most commonly known for its native cryptocurrency, Ether (ETH).
Ethereum is a digital technology that can be utilized by anyone to create anything secure. It has a token designed to pay for work done supporting the blockchain, but participants can also use it as currency to pay for goods and services if accepted.
Ethereum is versatile, permitting developers to create apps without interference from a third party. It is also secure, meaning that there is no chance of fraud or corruption. Lastly, it is decentralized, so anyone can use it regardless of location.
It comes with in-built support for smart contracts, an important tool that powers decentralized applications. By deploying multiple smart contracts on a blockchain, various DeFi projects and other apps achieve decentralization.
What Do You Need to Invest in Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.
In order to buy Ethereum, you need to first set up an account with a digital currency exchange (like Binance, Coinbase, or Crypto.com). Once you have set up your account and verified your identity, you will be able to deposit money into your account and use it to purchase Ethereum.
Once you have purchased Ethereum, you can store it in a digital wallet or on the exchanges stated earlier. Again, the best option for you will depend on your individual needs and preferences. However, it is important to remember that if you store your Ethereum on an exchange, you will not be able to control your private keys and will, therefore, be at the mercy of the exchange’s security measures.
That’s why, if possible, it is always best to store your Ethereum in a digital wallet that gives you full control over your private keys, just like the commonly used Metamask or Trust Wallet.
How to Invest in Ethereum?
There are several ways to invest in Ethereum, ranging from buying and holding Ether tokens to actively trading on crypto exchanges or joining mining pools.
One way to invest in Ethereum is by purchasing Ether directly through a digital currency exchange, such as Binance or Coinbase. Staking is also an option wherein you invest your Ether tokens in exchange for rewards. You can also invest in Ethereum through Decentralised Finance (DeFi) platforms, such as Uniswap or Compound.
Below are the steps needed to fully engage in the Ethereum experience.
Create Ethereum Wallet
If you are interested in investing in Ethereum, one of the first steps you will need to take is creating a digital wallet to store your Ether tokens. There are several different options available depending on your needs and preferences. Some popular options include Metamask, Ledger Nano S, or Trust Wallet.
To create an Ethereum wallet, simply head over to the official website for your chosen wallet and follow the instructions there. Before making any transactions on your wallet, it is important to back up your private keys and ensure that you take all necessary security precautions.
Once you have created your Ethereum wallet, you will be ready to start investing by either purchasing, trading, or holding crypto.
Connect Your Wallet to a Bank Account
To invest in Ethereum, you will need to first connect your digital wallet to a bank account or credit card. This will allow you to deposit money into your exchange account and then use it to purchase Ether tokens.
Depending on the wallet that you have chosen, this process may be slightly different. For example, if you are using Metamask, you can simply go to the “Add Funds” option and choose from several supported payment methods. Once your payment is processed and confirmed, your funds will become available for use within your Metamask wallet.
If you are using a different Ethereum wallet like Trust Wallet, you may be able to connect directly with an associated bank account through their app or website interface.
Place Your Ethereum Order
Once your wallet is set up and you have deposited money into your exchange account by connecting your bank account, you are now ready to invest in Ethereum by placing an order to buy Ether tokens.
To do so, simply navigate to the “Buy/Sell” option on your chosen exchange and follow their instructions for placing a buy order, usually consisting of the type and amount of cryptocurrency that you wish to invest in. Once your order has been placed, it will be fulfilled either immediately or over time, depending on the exchange’s trading policies.
Please keep in mind that additional fees will be required when purchasing Ethereum, and this will vary on which exchange you would use.
How to Manage Your Ethereum Investments
Once you have successfully invested in Ethereum and are holding Ether tokens in your digital wallet, the next step is to manage your investments.
This includes keeping track of your current portfolio value and monitoring any changes that may impact the performance of your investment over time.
In addition, it is important to be aware of potential security risks and take proactive measures. Also, check on the crypto market from time to time, especially Bitcoin (BTC), as this is the mother coin, and once BTC dips, the whole market follows its trend, and so does Ethereum.
There are many tools and resources available to help you effectively manage your Ethereum investments. Some popular options include Blockfolio or TradingView. Even Binance offers market charts that can be seen through its Spot Trading and Futures Trading Options.
Is Ethereum a Good Investment?
Since Ethereum first hit the market, its performance has been impressive, drawing in both traditional and institutional investors. Cryptocurrencies like Ethereum offer several advantages over more traditional investments, making them a good choice for anyone looking to invest:
- Volatility. What was once thought of as a negative can actually be a positive for smart investors. By recognizing patterns in market cycles, investors can take advantage of the huge gains made during market bubbles.
- Liquidity. Ethereum is exchangeable for cash or other assets, like gold, nearly instantaneously and with low fees on many trading platforms worldwide. This high liquidity makes Ethereum a good investment if you’re seeking short-term profit. Digital currencies may also be profitable in the long run because of their high market demand.
- Lower inflation risk. Ethereum is less susceptible to government regulation than world currencies, and its inflation plan is transparent. The blockchain system can not be exhausted, so there’s no need to worry about your cryptocurrency losing value. Essentially, people think that crypto, in general, is an alternative to the inflation of traditional currencies.
- Decentralized Finance. Since Ethereum and DeFi are still relatively new, there are a lot of unknowns that can lead to price swings and volatility. However, this also creates opportunities for investors to make massive gains and to build over on a promising platform.
Ethereum vs. Other Investments
Ultimately, whether you invest in Ethereum or other cryptocurrency options depends on your personal investment goals and risk tolerance. Both ETH and other cryptocurrencies have the potential to grow into a diversified portfolio, but they are not without risks.
Ethereum has proven to be one of the best and safest investments to date, and with ETH projects continuously building and the solid blockchain foundation that it has already created, we can say that Ethereum would be one of the best investments in the short and long run.
Ethereum is more than a currency; the invisible blockchain that it runs on also has other potential applications and uses. More businesses are using Ethereum because of this, and there are no limits to what Ethereum can be used for in the future.
The Pros of Ethereum Investing
By understanding the Pros and Cons of investing in Ethereum, you can decide if it is the right investment choice for your portfolio. Here are the top advantages of investing in Ethereum.
Well-known Founder and an Expanding Developer Community
Ethereum has quickly become one of the most popular digital assets since it launched in 2015. The team behind Ethereum, led by Vitalik Buterin, is highly respected by many in the cryptocurrency community.
Ethereum’s roadmap is also open and transparent, which gives investors more confidence in the project. Additionally, Ethereum’s developer ecosystem continues to grow, with over 250,000 active developers, according to ConsenSys. Such strong support means that investing in ETH can be a smart decision for long-term growth potential.
Ethereum Is Decentralized
A pro of Ethereum investing is that it’s decentralized. Blockchain technology, which supports Ethereum, is transparent and offers an alternative to traditional banking systems.
More Than Just a Cryptocurrency
Some of the primary benefits of investing in Ethereum are its smart contracts, dApps, and numerous decentralized finance projects. It can also be used for a variety of purposes, such as gaming, medicine, and energy distribution. Additionally, it can tokenize art forms like NFTs, patents, voting history, medical records, ID verification, and crypto-collectibles, among other things.
The Ethereum Enterprise Alliance is one of the leading organizations monitoring Ethereum, and many big companies support its development. And with ETH’s steady growth, it is likely more and more investors will get into investing in the 2nd largest cryptocurrency to date.
Another pro of investing in Ethereum is that it facilitates numerous Initial Coin Offerings (ICOs). ERC-20 tokens are often seen as the standard for fundraising and ICOs, which cater to bigger business professionals.
Ether Is not Capped
Unlike Bitcoin, there is no limit to the amount of Ether that can be mined. ETH transactions are completed with self-executing contracts and have much faster transaction times.
Ethereum Is the Lifeblood of the Cryptocurrency World
Cryptocurrencies are always looking for ways to connect with Ethereum, and many of them started out as ERC-20 tokens on the Ethereum network before moving to their own blockchain.
Today, some of the biggest cryptos are still based on Ethereum, such as Uniswap. When cryptos build bridges to Ethereum, it opens up a whole world of possibilities in terms of market reach and resources. Even Ethereum Classic – which had a very public falling-out with Ethereum – is now building a bridge back to access its resources.
The Cons of Ethereum Investing
Although there are optimistic outlooks for Ethereum, to be fair, we must look at the disadvantages of investing in Ethereum.
Ethereum’s multifunctionality may be an attractive feature, but some investors are wary of investing in ETH because the more features it includes, the more vulnerabilities there are that could be exposed. On top of that, Ethereum still must deal with scaling and network congestion issues to attract more cryptocurrency investors.
Hard-to-Understand Programming Language
If you’re looking to get into Ethereum programming, Solidity is the language you need to learn. However, it can be pretty tricky for beginners. There are a few beginner-friendly tutorials available online. Part of the reason why Solidity is difficult to learn is that it’s not just a programming language; it also generates machine-level code and acts as a compiler for the Ethereum Virtual Machine.
High Transaction Fees
In early 2021, when ETH transaction fees reached unprecedented levels due to network congestion, many projects started exploring other options with more stable pricing.
Ethereum gas fees went as high as around $75 per transaction, which would be unpleasant, especially for retail investors.
How to Invest in Ethereum: Different Methods
We briefly mentioned some of the available options for investing in Ethereum before. Now it’s time to dive into the specifics.
1. Buying Through an Exchange
Cryptocurrency exchange platforms are one of the easiest ways to buy and hold Ethereum. They allow you to trade cryptocurrencies, as well as access crypto-financial services like lending, borrowing, and payments.
If you’re new to investing, consider an exchange like Coinbase or Gemini. These are exchanges that have been created with beginners in mind and will offer a simpler experience. If you have some previous investment experience, then Binance US or KuCoin might be a better option, as they offer additional features and more complex trading options.
Choosing to store your ETH in a crypto savings account is one of the major advantages of using an exchange. By doing so, you can passively grow your investment with very little effort required on your part.
2. Through a Brokerage App
Investing in Ethereum is made easy with apps like Robinhood, SoFi, or Webull. These apps work similarly to exchanges but typically offer fewer features and only allow for buying and selling. Some don’t even let you withdraw your ETH, which means that you can’t move it to a personal wallet or another exchange or use it for its intended purpose within the Ethereum blockchain network.
If you’re only interested in buying ETH and HODLing, then a broker or app may be the best option for you. They can both be downloaded to your smartphone and set up within minutes. Just make sure that you have your photo ID ready to go so that you can complete the account verification process.
After you buy your ETH, you can move it to a personal cryptocurrency wallet or savings account if the app permits you to withdraw Ethereum from one address or service and into another.
3. Through Peer-to-Peer Transactions
If you’re willing to stomach more risk, you can buy ETH directly from other individuals without going through a crypto exchange or brokerage. And if privacy is crucial to you, this might be one of the only ways remaining to purchase ETH anonymously.
On a safer alternative, crypto exchanges like Binance offer Peer-to-Peer transactions where the transactions are regulated by the exchange; however, this wouldn’t be your cup of tea if you want to buy P2P privately.
4. Through ETH Staking (Proof-of-Stake)
Since 2022, Ethereum has utilized a proof-of-stake consensus mechanism instead of the previous proof-of-work method. The newer system is more secure and efficient, allowing for new scaling solutions to be easily implemented.
With proof-of-stake, validators show that they have capital invested by licking a smart contract on Ethereum. The amount of ETH staked then becomes collateral that can be taken away if the validator misbehaves in any way. The validator must make sure that new blocks being spread around the network are safe and occasionally make new blocks themselves too.
There are numerous advantages to the proof-of-stake system over the older proof-of-work method:
Energy Efficiency – You won’t need to use a lot of energy for proof-of-work computations.
Hardware-friendly equipment – You don’t need top-notch hardware to have a chance of creating new blocks.
Reduced centralization risk – The proof-of-stake system should prompt wider cryptocurrency adoption because its low energy requirement would mean fewer ETH issuers to incentivize participants.
Tips for Investing in Ethereum
Whether you’re new to Ethereum or a seasoned investor, here are some tips for investing in this Ethereum.
1. Start with a small investment. Because of Ethereum’s volatile nature, it’s best to start out with a small investment, especially if you’re new to crypto investing. This will allow you to test the waters without taking on too much risk.
2. Research the latest trends in Ethereum investing. Keep up with news and developments in the crypto world to stay informed about how Ethereum may be impacted in the near future. This will help you make more informed investment decisions, as well as protect your capital when prices are fluctuating sharply.
3. Join a crypto investment community or invest in a professional trading platform. Exchange platforms and investment communities can provide valuable insights, market analysis, and other resources to help you make better investment decisions.
4. Be prepared for potential price fluctuations. As with any high-risk investment, it’s important to be aware of the potential for sudden price changes that could happen at any given minute. Find out if you plan to hold your coin for short-term or long-term profits.
Strategies for Investing in Ethereum
Now that you know how to invest in Ethereum, here are some strategies for making the most of your ETH investments.
A systematic investment plan, or SIP, is an investing method in which the investor sets aside a fixed amount of money to be deposited at equal intervals into a chosen account. This could be anything from a mutual fund to a retirement savings account. By making smaller regular payments instead of one lump sum, investors can take advantage of dollar-cost averaging (DCA), as well as other long-term benefits.
2. Dollar Cost Averaging
The idea behind this strategy is that the investor diminishes their chances of loss by investing money in increments over a longer period instead of all at once. By taking advantage of market downturns, they can gain more without putting too much at stake.
DCA is created to help fight any bad outcome on an investment that may be caused by brief market instability. If the price of what you’re investing in falls when dollar cost is averaging, then there’s potential to make a profit if the price starts going up again. If you’re new to cryptocurrency, Dollar Cost Averaging can spare you from trying to time stock prices perfectly.
If you are new to the cryptocurrency world, we do not recommend speculating on price movements via a CFD trading account or exchange. This strategy takes a lot of experience and knowledge.
If you want to bet on the rise or fall of cryptocurrency prices without actually owning any coins, then CFD trading is a great option for you. You can choose whether to go long (‘buy’) or short (‘sell’) based on your understanding of the market and what you believe will happen with prices.
The Bottom Line
Investing in Ethereum 2023 should have similar strategies involved as investing in Ethereum currently. It’s important to invest only what you can afford to lose, research the risks associated with investing in Ethereum, invest small amounts at a time, diversify your portfolio and invest for the long term.