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How To Buy Ethereum – Forbes Advisor

How To Buy Ethereum
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While Bitcoin is the top cryptocurrency based on the value of its coins in circulation, Ethereum is not relieving. With a market capitalization of over $232 billion, it is the second largest form of cryptocurrency and has the support of business leaders such as Mark Cuban.

Moreover, it was a profitable investment option. If you invested $1,000 in Ethereum in August 2015, your investment would be worth a staggering $2.23 million roughly six years later.

Here’s how to get started buying Ether, the official name for the token that is more commonly called Ethereum due to its association with the Ethereum platform it has.

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How to buy Ethereum

Investing in Ethereum may be easier than you think. Here’s how to get started in just five steps:

1. Determine your risk level

There is no getting around. Buying Ethereum can be a gamble. While all investments have some risk associated with them, cryptocurrencies are particularly vulnerable to price fluctuations. Just think about the effect a few hundred characters can have on cryptocurrency prices: after Elon Musk tweeted that Tesla would not accept Bitcoin as payment, for example, the value of the coin plummeted by 15%.

Although Ether has made amazing returns in the past, it has also had some big crashes, sometimes in surprisingly short timeframes. Notably, it went from nearly $4,000 per coin in May 2021 to less than $1,800 in June 2021. If you had bought at a high, you would get half that value after just one month. This is kind of extreme volatility.

That is why it is important to consider risk tolerance along with the diversity and stability of the rest of your investment portfolio before purchasing Ether. Experts recommend never investing more in cryptocurrency than you can afford to lose.

2. Choose a cryptocurrency exchange

Buying Ether is more complicated than just buying stocks or mutual funds through your existing brokerage account. Cryptocurrencies are not traded on major exchanges such as the New York Stock Exchange (NYSE), and many brokerages do not offer to invest in cryptocurrencies.

To buy cryptocurrencies, you first have to create an account on a cryptocurrency exchange. In practice, it’s just like the brokerage platforms you might be more familiar with: Cryptocurrency exchanges allow buyers and sellers to exchange fiat currencies – such as dollars – for cryptocurrencies such as Ethereum, Bitcoin or Dogecoin. If you don’t already have a cryptocurrency exchange in mind, take a look at our list of the best cryptocurrency exchanges to find what works for you. Although the trading platforms of some exchanges are complicated, most of them offer a simple buying interface for beginners, although they may charge higher fees than their trading platform.

Two key points: When choosing an exchange, make sure that they offer a crypto wallet to store your investments. The vast majority do, but if you don’t, you’ll need to get one of your own.

And if you are really a beginner, you can always use a platform like Robinhood or Cash App. This will greatly simplify the process of buying cryptocurrency for you, but it comes with a hidden cost: you cannot withdraw your investment in Ethereum to put it in a third-party wallet or use it to pay for online purchases. Using one of these simplified platforms means that cryptocurrencies can only be traded through the platform that you are buying them on. So you will need to cash out the cash from that platform and then buy it back on a crypto exchange to keep in a separate wallet.

3. Fund your account

Before you can buy Ethereum through a crypto exchange, you must fund your account. In most cases, you will deposit money from a bank account, such as a personal checking or savings account. You can also generally complete wire transfers, use a debit card, or deposit money from PayPal.

When choosing a funding method, review the fees for a cryptocurrency exchange; It can vary based on the method. For example, wire transfers are free on Gemini, but the platform charges a 3.49% fee for debit card transfers.

One caveat: some platforms allow you to buy cryptocurrency with a credit card. While this may sound tempting, credit card companies generally consider purchasing cryptocurrencies as cash advances. Depending on the card you have, you may have to pay a higher interest rate and cash advance fees as well as cryptocurrency exchange fees.

4. Buy Ethereum

When you buy stocks, mutual funds, or exchange-traded funds (ETFs), you are limited by market hours. For example, NASDAQ trading hours are 9:30 AM to 4:00 PM ET, and the exchange is closed on weekends and certain holidays.

Cryptocurrencies like Ethereum work very differently: since they are decentralized currencies, you can buy and sell them around the clock.

To buy Ethereum, enter the ticker symbol – ETH – in the “Buy” field on the exchange and enter the amount you want to buy. If you don’t want to buy an entire Ethereum token or you don’t have enough money in your account for a whole coin, you can buy a fraction of one. For example, if the price of Ethereum is $2000 and you invest $100, you will buy 5% of Ether. This is just like when you buy a fractional share of stock.

5. Store your Ethereum

After processing your purchase of Ethereum, you must store your cryptocurrency. While some platforms store it for you, some people choose to store their investment themselves to reduce the possibility of losing their crypto due to a hack. This is understandable, but it is also important to note that most major exchanges secure their clients’ holdings and often store the majority of their assets offline to prevent major thefts. Moreover, historically hacked exchanges made up for any losses.

But if you want peace of mind surrounding cryptocurrencies, you can choose to move them to one of two types of third-party wallets:

  • Hot wallet: The hot wallet is connected to the Internet and can be accessed from a computer or smartphone. It is convenient and is usually provided by crypto exchanges at no additional cost, although you can also use your own system if you prefer to park your cryptocurrency from the exchange. However, since they are still online, they are more at risk of security breaches.
  • cold wallet: Cold wallets, meanwhile, are external devices completely disconnected from the Internet. Depending on the type you choose, they usually cost between $50 and $200, although more expensive versions are available. While cold wallets are less convenient than hot wallets – you have to manually connect them to the internet every time you want to access your cryptocurrency – they are more secure and may make sense if you own a large amount of Ethereum or other cryptocurrency.

Sell ​​Ethereum

To sell your Ethereum, simply return to the cryptocurrency exchange and enter the amount you want to sell.

If you sell a large amount of cryptocurrency, you may want to consult a tax professional. Despite its decentralized nature, crypto is taxable in the eyes of the federal government. Your gains from the sale are usually subject to capital gains taxes and can significantly affect the amount you owe to the IRS as tax time.

Should I buy Ethereum?

Ethereum is very popular, with more than 116 billion coins currently in the hands of investors. But just because it is one of the most popular cryptocurrencies does not mean that it is right for you.

Before buying a volatile investment like Ether, you will need to make sure that you do your research and that your funds are in good shape. Ideally, you should have a large emergency fund, have a maximum of retirement accounts and have a minimum debt. Even if you can check all these boxes, it is important to diversify your portfolio, so only a portion of your investments should be in Ethereum and other cryptocurrencies.

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