How to Buy Ethereum – Forbes Advisor

Editorial note: We earn commission from partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.

Although Bitcoin is the top cryptocurrency based on the value of its coins in circulation, Ethereum is not left out. With a total value of over $230 billion, it is the second largest cryptocurrency by market capitalization. Here’s how to start buying Ether, the official name of the token that runs the Ethereum platform.

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 way around this problem; buying Ethereum can be a gamble. Although all investments carry some risks, cryptocurrencies are particularly vulnerable to price fluctuations. Just think about the impact a few hundred characters can have on the price of cryptocurrencies: after Elon Musk tweeted that Tesla would no longer accept Bitcoin as payment, for example, the coin’s value dropped by 15%.

Although Ether has seen impressive returns in the past, it has also experienced significant crashes, sometimes in surprisingly short time frames. Notably, it fell from a high of almost $4,000 per coin in May 2021 to less than $1,800 in June 2021. If you had bought at its high, you would be sitting with barely 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 purchasing Ether. Experts recommend never investing more in crypto than you can afford to lose.

2. Choose a crypto exchange

Buying Ether is a bit more complicated than simply purchasing stocks or mutual funds through your current account. brokerage account. Cryptocurrencies are not traded on major exchanges like New York Stock Exchange (NYSE)and many brokerages do not offer crypto investing.

To buy cryptos, you must first create an account on a crypto exchange. In practice, it’s like the brokerage platforms you may be more familiar with: crypto exchanges allow buyers and sellers to exchange fiat currencies, like dollars, for cryptocurrencies like Ethereum, Bitcoin or Dogecoin. If you don’t have a crypto exchange in mind yet, take a look at our list of best cryptocurrency exchanges to find the one that suits you. Although some exchanges’ trading platforms become complex, most offer a simple purchasing interface for beginners, although it may charge higher fees than their trading platform.

Some key points: When choosing an exchange platform, make sure it offers a crypto wallet to store your investments. The vast majority do, but if not, you’ll need to get one.

And if you’re a real beginner, you can always use a platform like Robinhood or Cash App. This will greatly simplify the process of buying crypto for you, but it comes with a hidden cost: you cannot withdraw your Ethereum investment and put it into a third-party wallet or use it to pay for online purchases. Using one of these simplified exchanges means that your crypto will only be able to be traded on the exchange you purchase it on. So you will need to withdraw money from this platform and then buy it back on a crypto exchange to keep it in a separate wallet.

Start investing in Ethereum today with Coinbase

Buy and sell the most popular cryptocurrencies

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 your personal checking or savings account. You can also usually make wire transfers, use a debit card, or deposit money from PayPal.

When choosing a funding method, look at the crypto exchange’s fees; they may vary depending on the method.

A warning: some platforms allow you to purchase cryptocurrencies using a credit card. Although it may seem tempting, credit card companies generally consider cryptocurrency purchases to be cash advances. Depending on the card you have, you may have to pay a higher interest rate and cash advance fees on top of the crypto exchange’s fees.

4. Buy Ethereum

When you buy stocks, mutual funds, or exchange-traded funds (AND F), you are limited by market times. For example, Nasdaq Trading Hours are from 9:30 a.m. to 4:00 p.m. ET, 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 24 hours a day.

To purchase Ethereum, enter its ticker symbol — ETH — into the “buy” field on your exchange and enter the amount you wish to purchase. If you don’t want to purchase an entire Ethereum token or don’t have enough money in your account for a full coin, you can purchase a fraction.

For example, if the price of Ethereum is $2,000 and you invest $100, you will buy 5% of an Ether coin. It’s like when you buy a fraction of share of a stock.

5. Store your Ethereum

Once your Ethereum purchase has been processed, you need to store your cryptocurrency. Although some platforms store them for you, some people choose to store their investments themselves to reduce the risk of losing their crypto to a hack. This is understandable, but it is also important to note that most major exchanges insure their customers’ holdings and often store the majority of their assets offline to avoid mass thefts. Additionally, historically, hacked exchanges have reimbursed all losses.

But if you want peace of mind regarding your crypto, you can choose to move it to one of two types of third-party wallets:

• Hot wallet: A hot wallet is connected to the Internet and can be accessed from a computer or smartphone. They are convenient and are usually provided by cryptocurrency exchanges at no extra cost, although you can also use your own if you prefer your crypto off the exchange. However, because they are always connected to the Internet, they are at higher risk of security breaches.
• Cold wallet: Cold wallets, meanwhile, external devices are completely disconnected from the Internet. Depending on the type you choose, they typically cost between $50 and $200, although there are even more expensive versions. Although cold wallets are less convenient than hot wallets (you have to manually connect them to the internet every time you want to access your crypto), they are more secure and may make sense if you own a significant amount of Ethereum or other cryptocurrencies.

How to sell Ethereum

To sell your Ethereum, simply return to your crypto exchange and enter the amount you wish to sell.

If you are selling a significant amount of crypto, you may want to consult a tax specialist. Despite its decentralized nature, crypto is taxable in the eyes of the federal government. Your profits from the sale are generally subject to capital gains taxes and can significantly affect the amount you owe the IRS at tax time.

Should you invest in Ethereum?

Ethereum is extremely popular, with over 116 billion coins currently in the hands of investors. But just because it’s one of the most well-known cryptocurrencies doesn’t mean it’s right for you.

Before you buy a volatile investment like Ether, you need to make sure you’ve done your research and that your finances are in good shape. Ideally, you should have a large emergency fund, max out your retirement accounts, and have minimal debt. Even though you can check all of these boxes, it’s important to diversify your portfolio, which is why only a portion of your investments should be in Ethereum and other cryptocurrencies.

Source