Ether (ETH) is the second-largest cryptocurrency by market capitalization. ETH is the native token for the Ethereum blockchain, the largest blockchain to create decentralized applications (DApps).
Given Ethereum’s growing popularity, new market participants constantly explore how to buy Ethereum. Over the years, ETH has achieved much growth, with early investors recording significant profits.
This article explores everything you need to know when buying Ethereum. We will discuss how to trade Ether and whether this cryptocurrency is a good investment.
What Is Ethereum?
Before exploring how to buy Ethereum, let us briefly scrutinize what it is, its functionality, and its burgeoning popularity in the cryptocurrency market.
Ethereum is an open-source blockchain that people can use to create decentralized applications (DApps). DApps are projects created using blockchain technology. They can range from games, finance applications, marketplaces, trading platforms, and more.
Ether is the native token used to pay for transactions on Ethereum. It is among the tokens with the highest utility because of the high popularity of the Ethereum blockchain among developers.
Differences Between Ethereum And Bitcoin
Bitcoin is the largest cryptocurrency, with its market cap transcending $1 trillion. The other cryptocurrencies in the market are dubbed as altcoins. Ethereum is the largest altcoin, with its market cap transcending $350 billion.
There are distinct differences between Bitcoin and Ethereum. Bitcoin has gained wide adoption as a means of currency. It has become legal tender in El Salvador and the Central African Republic. Conversely, Ether has yet to be adopted in any jurisdiction as a legal tender.
With Bitcoin dominating as a digital currency, Ether is gaining popularity in the smart contract world. Smart contracts are digital agreements written in code that can streamline processes and eliminate third parties.
Ethereum smart contracts have supported the creation of games, marketplaces, finance platforms, social media platforms, and other applications on the blockchain. Smart contracts are the next big thing in the blockchain industry, having even received recognition from JPMorgan CEO Jamie Dimon for their potential.
The other key difference between Bitcoin and Ethereum is that Bitcoin uses a proof-of-work (PoW) consensus, while Ethereum uses a proof-of-stake (PoS) consensus. Ethereum previously operated under PoW, but it was later forced to switch to PoS, which was more sustainable and user-friendly.
The Potential Of Ethereum
Ethereum has emerged as a significant player in the blockchain space. The blockchain is being used to create many applications that leverage the benefits of blockchain technology, such as improved security, speed, and decentralization.
The use of smart contracts continues to grow. Banks are experimenting with blockchain technology to discover how they can transform their offerings. With Ethereum at the center of smart contracts, it is poised for more growth and adoption.
With Ethereum’s massive potential in blockchain, its native token, ETH, is poised for growth. As such, people always want to buy Ethereum and be part of a burgeoning ecosystem.
Before we explore how to buy Ethereum, let us first analyze some factors you must consider before investing.
Factors To Consider Before Buying Ethereum
- Risk
Among the factors that you need to consider buying Ethereum is the risk. ETH is a high-risk asset because of the volatile price movement. The price can change drastically quickly, and you might lose all your investment.
You should only invest in Ethereum if you are willing to lose all your money. This digital asset is not suitable if you are a risk-averse trader.
- Adequate research
Before investing in any financial asset, including Bitcoin, you must conduct in-depth research to ensure you know everything.
Cryptocurrency is still a nascent asset class, with many needing more information on how it works. Before buying Ethereum, research whether it will be suitable for you.
- Investment goal
Before you buy Ethereum, have a clear investment goal in mind. If you are buying Ether for the long term, ensure that you have adequately researched where to store your assets.
If you are buying ETH for the short term, you should clearly understand the market to know the right time to enter and exit the market. As ETH is volatile, finding the right time to trade is crucial.
A Step-by-Step Guide To Buying Ethereum
Once you have these factors in mind, the next thing to do is to purchase Ethereum. To buy Ethereum instantly, follow the following steps:
Choose A Cryptocurrency Exchange
The first step in buying Ethereum is to pick the proper cryptocurrency exchange to buy Ether. Many cryptocurrency exchanges are available in the market, each with unique features.
When choosing a cryptocurrency exchange, you should consider the following factors:
- The security of the cryptocurrency exchange – An exchange should invest in security to protect user funds from malicious actors.
- The cryptocurrencies supported on the exchange – To buy ETH, you must ensure it is supported on your exchange.
- Trading fees charged on the exchange – The best exchange is the one that charges user-friendly fees.
- The exchange’s compliance with the existing regulatory frameworks – Crypto regulatory frameworks are constantly shifting, and you should avoid issues with your country’s regulator by using a regulated platform.
- Testimonials from other users on the exchange – Checking what other past users say about an exchange is vital, as it will give you a glimpse of what to expect.
Picking a cryptocurrency exchange should be of utmost importance. Over the years, the cryptocurrency industry has seen the collapse of several exchanges, with the most common being Mt.Gox, which shut down after a hack, and FTX, which shut down due to bankruptcy.
In each case, the exchanges collapsed with people’s funds, causing massive losses. Therefore, picking an exchange is one of the most important things to do before you buy Ethereum or any other cryptocurrency.
Create An Account On A Crypto Exchange
After picking a cryptocurrency exchange, the next step is to create an account. The account registration process varies from one exchange to the other.
The first thing you need to create an account on a cryptocurrency exchange is an email address or a phone number. Some exchanges allow you to proceed with just these details, but some will require that you validate the information.
If an exchange has a know-your-customer (KYC) process, you must verify your identity to buy Ethereum on the platform. A KYC process involves you submitting information such as a government-issued ID or driver’s license for the exchange to verify you are the person you say you are.
A changing regulatory framework has made KYC requirements mandatory in jurisdictions like Europe. Europe is currently working on the Markets in Crypto Assets (MiCA) regulations that will address the prevalent issue of money laundering and terrorism financing through crypto activities.
Fund Your Exchange Account
After creating a cryptocurrency exchange account, the next thing you need to do is to fund the account. Funding your account means that you deposit fiat currency into the exchange. There are many payment methods available on exchanges.
The first way to fund your account is by using your bank card. You can buy Ethereum with a debit card by linking it to the exchange. Once you do that, you can deposit the amount you wish to spend into the exchange. You can also buy Ethereum with a credit card if your provider supports the option.
It is also possible to buy Ethereum with PayPal. Some exchanges allow you to deposit money directly from your PayPal account if you do not want to use a bank. The amount of tokens you get will depend on the price of ETH at that time.
You should note that you might be charged a fee to deposit fiat into an account. Moreover, exchanges only support select fiat currencies. Go through the exchange’s website to see whether the fiat you intend to deposit is supported.
Place An Order To Buy Ethereum
Once you have money in your account, it is time to buy Ethereum. To do so, you can create an order on the cryptocurrency exchange you want to use.
There are multiple types of orders that you can use to buy Ethereum, with the most popular being market orders, limit orders, and stop-limit orders.
- Market orders – A market order is an order that will be executed instantly at the current price of ETH. With this type of order, you can purchase Ethereum before the price increases.
- Limit orders – Unlike a market order, a limit order will not be executed immediately. It will be executed at the best price you want to buy ETH. Suppose ETH is trading at $3,000, but you suspect the price will drop to $2,800. You can place a limit order that will only be executed when the price drops to $2,800.
- Stop-limit order – A stop-limit order limits the losses that you might incur in a trade. With this type of order, you set a stop and limit prices. This type of order protects you from Ether’s volatile price movement.
After the exchange executes your order, you will find the ETH you buy reflected on the exchange account.
Store Ethereum in a wallet
After buying Ethereum, the next step is to create a digital wallet. You will need a wallet to store Ethereum securely.
Many types of wallets exist, the most common being hardware and software wallets. If you want to buy and hold ETH long-term, use a hardware wallet. Conversely, a software wallet works if you’re going to trade ETH frequently.
Hardware wallets come in the form of USB drives, most commonly being Ledger and Trezor. Cryptocurrency exchanges also offer software wallets that mainly come as apps.
After creating a wallet, you must practice best practices to keep your assets safe. Threat actors constantly seek ways to steal ETH from unsuspecting wallet users. Ensure you create a strong password for your wallet and do not share your keyphrase with anyone to secure transactions.
How To Protect Your Ethereum Holdings
A 2023 report from Chainalysis shows that $1.7 billion worth of crypto assets were stolen from the market during the year. Most of the stolen assets were taken from crypto users after tricks by malicious actors.
Phishing campaigns are among the most common types of attacks in the sector. In such attacks, a threat actor tricks an ETH holder into sharing their wallet details. If you are not vigilant, you might be a victim of such an attack.
- Always be wary of suspicious apps or websites to secure your ETH holdings.
- You should also invest in a good security program, such as antivirus software, that detects and eliminates malicious software.
- You should also upgrade your crypto wallet regularly.
It is also best to store ETH in a hardware wallet for self-custody. You should refrain from storing ETH on an exchange, as that leaves it vulnerable to any unprecedented changes on an exchange.
How To Manage Your Ethereum Investment
Like any other asset, you need strategies to manage your investment and maximize your potential returns. When it comes to Ethereum or any other high-risk asset, the best way to manage your investment is by constantly tracking the value of your Ethereum holdings.
If you are a short-term trader, you should know that the value of your holdings will constantly change as the price of ETH does not stay in the same place for long. For instance, ETH is trading at around $3,000, 38% below its all-time high of above $4,800 recorded in 2021.
Below is a chart showing Ethereum’s price movement in one week. If you are a short-term trader, you should constantly check on these prices to increase your chances of making profits.
On the other hand, if you are a long-term investor, you can choose to store your holdings in a cryptocurrency wallet. However, when doing so, ensure that you protect your assets.
You must also remain up-to-date with everything happening in the Ethereum ecosystem. The blockchain is constantly undergoing upgrades, which affect the price movement. For instance, after the Dencun upgrade, ETH recorded massive volatility.
Understanding these developments and whatever the community says might help you know where the price is headed.
Besides trading Ethereum, you can also explore other use cases, such as what you can buy with Ethereum. You can explore using ETH to interact with projects built on the blockchain. ETH is also gaining value as a medium of exchange over the Internet.
If you are wondering, “What can I buy with Ethereum?” you should consider checking websites that accept ETH payments.
In Summary
Ethereum is the second-largest cryptocurrency in terms of market capitalization. It has become quite popular among cryptocurrency traders because of its potential for growth as the king of smart contracts.
As you explore how to buy Ethereum, you should first understand that the price is volatile. It can fluctuate unexpectedly, causing significant losses to an investor. Therefore, if you want to buy Ethereum, ensure you have a high-risk appetite.
If you want to buy Ethereum, the first process is to pick a cryptocurrency exchange and fund the account. You should then fund this account and buy ETH depending on the price of Ether at the time you purchase it. After buying ETH, you should store it in a wallet to secure your holdings.
FAQs
-
How can I buy Ethereum?
You can buy Ethereum using a cryptocurrency exchange. A crypto exchange is like a brokerage platform that you use to place buy and sell orders for ETH. If you want to buy Ethereum from an exchange, simply deposit supported fiat currency and place your order.
-
Can I buy a fraction of Ethereum?
You can buy a fraction of Ethereum. With ETH trading at around $3,0000, you do not have to buy an entire coin. Instead, you can buy ETH worth the amount of fiat you are willing to spend.
-
Can I buy Ethereum with PayPal?
Yes. It is possible to buy Ethereum with PayPal. All you have to do is link your crypto exchange account with your PayPal account and create an order depending on the amount you want to spend.
-
How do I store Ethereum?
You can store ETH in a cryptocurrency wallet. Wallets are platforms that allow you to hold ETH securely. You can store ETH on an exchange’s hot or hardware wallets.
-
What are the risks involved with Ethereum?
Ethereum is a high-risk asset. The price is very volatile and can change unexpectedly by huge margins. Therefore, you should invest in Ethereum only if you know the potential losses.
