The world of cryptocurrency is full of coins to invest in, and with so many to choose from, it can be hard to make a decision. I'll assume Ethereum is one of the coins you’re most interested in investing. That comes with good reason — the second largest cryptocurrency has proved to be an amazing investment over the years. That's why many people now wonder - how to invest in Ethereum?
So, what have I got in store for you today?
Well, in this guide I am going to teach you about Ethereum - the pros, and cons of an Ethereum investment, and how to invest in Ethereum. By the end of this guide, you’ll have a greater understanding of Ethereum — and you will be able to answer the questions “is Ethereum worth buying?”, and if so, "what is the best place to learn how to invest in Ethereum?".
Jeff Burton
EA Co-Founder and CEO at Woodside Creek Ventures
How can cryptocurrencies impact traditional finance?
I believe that their most important global impact has been and will continue to be the disruption of worldwide banking, which has excluded billions of individuals from a financial existence. Allowing additional billions of people to safely join worldwide economic activity immensely benefits the “haves” and the “have-nots” in all countries and societies.
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Table of Contents
- 1. How to Invest in Ethereum: Is Ethereum a Good Investment?
- 2. The History of Ethereum
- 2.1. Ethereum Classic
- 3. Should I Invest in Ethereum Long-Term? (1 Year + Holding Time)
- 3.1. The Adoption of Ether
- 3.2. Improvements to the Blockchain
- 3.3. Proof-of-Stake Technology
- 4. Should I Invest In Ethereum For the Short-Term? (0-12 Month Holding Time)
- 4.1. Trading Ether
- 4.2. The Future of Ethereum
- 5. Before You Invest in Ethereum
- 5.1. MEW (MyEtherWallet) - Web Wallet
- 5.2. Ledger Nano X – Hardware Wallet
- 5.3. Exodus – Software Wallet
- 5.4. Jaxx – Mobile Wallet
- 6. How to Invest In Ethereum?
- 6.1. How to Invest In Ethereum With Fiat Currency
- 6.2. How to Invest in Ethereum using Other Cryptocurrencies
- 7. Conclusions
How to Invest in Ethereum: Is Ethereum a Good Investment?
For many, investing in Ethereum has proven to be a great decision. Back in March 2017, the price of one Ether was $30. The price as of March 2018 is $750. In that one-year period, the value of ETH went up 25 times, or 2500%. So, if you had invested $1000 into Ethereum back in March 2017, right now you would have about $25,000 in ETH.
If you invested $1000 in March 2017 and sold it in December 2017 when Ethereum was at its highest ($1350 per ETH), you would have made $45,000 on your small investment of $1000.
As you can see, Ether has been a good investment so far. It’s favored by a lot of investors and has huge support from the crypto industry because it is used by other developers to start new blockchain projects.
You can see the growth that Ethereum has experienced over the past few years in the chart below (taken from coinmarketcap.com)
To understand more about Ethereum, let’s take a little look at some of Ethereum’s history.
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The History of Ethereum
The idea of Ethereum was first proposed in late 2013 by Vitalik Buterin, a programmer who felt that Bitcoin needed a way for developers to create their own applications on the blockchain. When that idea was rejected by the Bitcoin developers, Buterin formed the core Ethereum team with three other people: Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson.
In early 2014, they began developing Ethereum, and in July – August 2014, they funded and launched it through an online public crowd sale. Since then, the Ethereum team has made many improvements to the token.
Ethereum Classic
If you’ve ever looked up how to invest in Ethereum, you might have discovered that there are two Ethereum tokens: Ethereum (ETH) and Ethereum Classic (ETC).
ETH is the Ethereum token that is the most used and widespread. This is the token the developers actively improve and support. It is actually the second version of Ethereum and the result of a fork.
Note: A fork is when a blockchain is improved or changed in a way that makes it disconnect with the previous version. Let’s use an iPhone 8 software update as an example:
John and Tom both have iPhone 8’s. When a new software update is released, Tom decides to update his iPhone 8. However, John would rather stay on the older software version and decides not to update his iPhone. This is how a fork works. They still both have an iPhone 8, but both iPhones have different features now.
The coin was forked because a crypto exchange was hacked, and a lot of Ethereum Classic coins were stolen. To punish the hackers, the Ether community decided to fork Ethereum Classic and stop using the Ethereum Classic token. Instead, they created the new Ethereum token (ETH). By doing that, Ethereum Classic lost a lot of value, and the new Ethereum token became the more valuable of the two.
Cool, right? Shame on you, hackers!
Now, before I tell you how to invest in Ethereum, you need to know: is Ethereum a good investment for the long or short term?
Should I Invest in Ethereum Long-Term? (1 Year + Holding Time)
While investing in Ethereum has made its earliest investors a lot of money, there are some people that have also lost money. The truth is, the price of all cryptocurrencies rises and falls daily. It is a very strange and volatile market. That’s why, if you want to invest in Ethereum for the long term, you must be willing to hold on to your investment no matter what — you should never panic sell!
Here are some reasons why Ethereum could be a strong long-term investment.
The Adoption of Ether
The entire crypto industry is still young, and as it grows, so should Ethereum. It is one of the few coins that is used by ICOs (Initial Coin Offerings), which means it acts as a launchpad for new tokens. This makes Ethereum a valuable platform to the community, and also means the price of Ether could continue to grow as more people continue to use it.
Currently, ETH is considered one of the three most used cryptocurrencies for purchases and payments. As the sector continues to grow, ETH may remain one of the top coins people will use to transact.
With these two factors in mind, Ethereum has the potential to be a great long-term investment.
Improvements to the Blockchain
Another reason that could make Ethereum a good long-term investment is that there are plans for more improvements in the future. These new improvements could be a major success for Ethereum and cause the price of ETH to go up!
Even though there are new blockchains that compete with Ethereum, the right set of improvements could keep Ethereum ahead. The fact that so many people are already using Ethereum could give it a huge advantage over newer, similar blockchains.
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Proof-of-Stake Technology
Bitcoin and Ethereum are currently using a PoW (Proof-of-Work) system to validate transactions. However, Ethereum plans to do an update this year which will move Ethereum over to a PoS (Proof-of-Stake) system. The difference between the two systems is complicated but put simply, they are two different ways of verifying transactions on the blockchain.
The PoW method requires an expensive amount of electricity and computing power, while the PoS method is energy and cost-efficient.
If Ethereum manages to implement Proof of Stake, then it could make Ethereum much more valuable and more decentralized than Bitcoin. This means that the Ethereum network could become more secure than Bitcoin. Currently, only those who can afford the most powerful mining equipment can expect to become successful Bitcoin and Ethereum miners.
The Disadvantages of Investing in Ether Long-Term
- There are better investments that you could make in the sector. While you could make some good money investing in Ethereum, there are other crypto investments that could make you more money.
- Holding long term, also known as HODL (Holding On for Dear Life), does not allow you to take advantage of the crypto market’s volatility and make short-term profits.
- Even though Ethereum is one of the biggest cryptocurrencies as of today, no one knows if another coin could come along and become more popular and preferred. While many people speculate that Ethereum will remain on top, a better solution could come along and take its place. There are just no guarantees.
- Government regulations could come into place, which could cause the price of Ethereum to drop — you should always stay on top of new regulations! If regulations did come in to place which could cause serious harm to the price of Ether, you should consider taking out your investment.
Should I Invest In Ethereum For the Short-Term? (0-12 Month Holding Time)
The idea here is to actively trade Ether to lock in your profits. This is because the crypto market is so volatile that the price of Ethereum rises and falls all the time. So, there are plenty of opportunities to make quick profits.
Trading Ether
If you buy Ether when the price is low, you can then sell it when the price goes up and can lock in your profits before the price of the token drops again. Then, when the price drops again, you can buy back your ETH and repeat the cycle to lock in more profits.
For example, if you bought $1000 worth of ETH back in March 2017 and held it long term up until March 2018, you would have $25,000 worth of Ethereum right now. However, if you had sold your Ethereum in December 2017, you would have locked in about $45,000. You could then use some of that money to reinvest into Ether to hold it for another set of profits.
By doing this, you would have already made the money back on your investment and positioned yourself to make even more money.
The Future of Ethereum
Due to the fact that many ICOs intend to release their own tokens on the Ethereum network in the coming months, many expect to see Ethereum rise back up to its all-time high value and even pass it. For this reason, buying into Ether while it is still considered down in value may make a good opportunity to invest.
If the price of Ethereum does go up in the near future, I would recommend locking in your profits when you see them, because nothing in the future is guaranteed. Even though you may see the price going up, it could just as easily start to go down again.
Remember, there are a lot of factors that contribute to the volatility of a coin’s price, such as regulations, competition, and market manipulation. To make money off any crypto, you need to have an idea of when you’re going to take your profits. Sometimes, waiting too long could cause you to lose money.
The Disadvantages of Investing in ETH Short-Term:
- In terms of the profits you can make with short-term investments, there are other coins on the market that you could invest in that will do better than Ethereum.
- With governments around the world creating new regulations for the crypto market, some of these regulations could affect the value and usability of Ethereum. For example, a regulation that taxes the profit of every trade you make could affect your profits when short-term investing or actively trading.
- With banks and credit card companies stopping people from using their debit and credit cards to buy crypto, the flow of new money entering the market has slowed down. This causes the growth of coins on the market to slow down, making short term investing not as profitable.
- Actively trading in crypto markets is risky if you aren’t an experienced trader with a good understanding of how the market works.
Before You Invest in Ethereum
Before I tell you how to invest in Ethereum, you need to make sure you have a secure wallet to store your Ethereum in. Keeping your coins in an online exchange could be risky. Exchanges can be hacked, and your coins could be stolen. The best way to protect your cryptocurrency is to have a wallet where you have full control of your private key.
Note: Your private key is how you access your wallet (like a password). If someone gets access to your wallet, they can steal your funds.
Below are some wallets you can use to store your Ethereum.
MEW (MyEtherWallet) - Web Wallet
MEW is a free, open-source, client-side interface that allows you to create an Ethereum wallet. Unlike some other web wallets, MEW gives you control of your private key. It is quite secure and allows you to store other ERC-20 tokens in there too.
You can learn more about MEW in our MyEtherWallet Review.
Ledger Nano X – Hardware Wallet
A hardware wallet is one that allows you to keep your coins offline where they can’t be hacked or stolen. This is the safest method for storing your cryptocurrencies and you can store lots of different cryptocurrencies on the Ledger Nano X. The only thing you must do is keep the physical device safe. These hardware wallets are priced around $149.
Exodus – Software Wallet
Considered the world’s first desktop wallet that supports multiple cryptocurrencies, this wallet has an attractive display that makes it easy to view your crypto balances. It allows your computer to be used as a wallet.
Despite the fact that you have to be online to use it, your private keys are kept on your machine. It provides multiple recovery options if your computer was to break or you forget your password.
You can find out more about the Exodus wallet in our Exodus Wallet review.
Jaxx – Mobile Wallet
This wallet type is meant for your mobile devices but it can be used on your desktop as well. Jaxx also supports multiple cryptocurrencies. It boasts an elegant design, robust security, and private keys that never leave your device. It also features seed keys to recover your wallet.
How to Invest In Ethereum?
Learning how to invest in Ethereum will help you when investing in some other cryptocurrencies (such as Bitcoin and Litecoin). They follow a similar process. First, you need to use a broker or P2P exchange. Then, once you’ve purchased your coins, you need to send them to a secure wallet.
How to Invest In Ethereum With Fiat Currency
Broker Exchanges
A broker exchange allows you to exchange your fiat currency for cryptocurrency. While there are quite a few crypto broker exchanges, only a small number of them are considered reputable. The top three broker exchanges are Coinbase, CoinMama, and Cex.io.
All you have to do is sign up, confirm your identity, deposit your funds into the account, and then purchase your ETH. You can then send your ETH from your broker exchange wallet to your Ether wallet by using the designated wallet’s public key (wallet address).
Pros of Using a Broker Exchange:
- Highly professional and well-funded
- Good customer service
- Easy to navigate and learn to use
- Ideal for beginner investors
- Can use bank cards or credit cards to deposit cash for crypto
- More secure than most other exchanges
Cons of Using a Broker Exchange:
- High transaction fees
- Subject to KYC rules and therefore requires ID verification
- Can be audited and your transaction information given to tax authorities
- You don’t own your private keys to your broker exchange wallet
Using P2P Exchanges
The other way to buy Ethereum with fiat currency is to go through a peer-to-peer (P2P) exchange. Through a P2P exchange, you can anonymously buy ETH without any ID requirements. Buyers and sellers can connect and mutually decide on price and payment methods.
The most popular P2P platform for buying Ether is LocalEthereum. How it works is you buy Ethereum directly off of someone who already has it, and they transfer it from their wallet to yours.
Pros of Using a P2P Exchange:
- Peer-to-peer selling keeps transactions anonymous
- Buyers and sellers can negotiate and agree upon the price
Cons of Using a P2P Exchange:
- Highest fees among exchanges
- Sellers usually demand more than market price for their coins
- Not good for large purchases
- Some people on these networks can scam you
- A very well-known crypto exchange platform
- More than 500 different cryptos available
- Two-factor authentication
- Over 500 different cryptocurrencies available
- Strong security
- Small withdrawal fees
- Very low trading fees
- Exceptional functionality
- Mobile trading app
- Very competitive trading fees
- An intuitive mobile app
- Up to 100x leverage available
- Secure and reliable
- Low fees
- A good amount of fiat currencies accepted
- Reputable exchange
- Multiple fiat currencies are accepted
- Relatively low trading fees
How to Invest in Ethereum using Other Cryptocurrencies
Centralized Crypto Trading Exchanges
If you already own some crypto, like Bitcoin, you can use that to buy into Ether. One way to do this is to use a centralized exchange. With a centralized exchange, you can trade one crypto for another and pay a small transaction fee. The most popular crypto exchanges are Kraken, Binance, and GDAX.
Pros of Using a Centralized Trading Exchange:
- Can trade a variety of different coins for ETH
- A high volume of users makes it easier to liquidate and trade coins
- User interfaces are easy to navigate and learn
- Can be used anonymously in most cases
- Lowest fees among exchanges
- Customer service is usually available
Cons of Using a Centralized Trading Exchange:
- You don’t own your private keys to your exchange wallet
- You cannot buy with or withdraw to cash
- On some exchanges, like Binance, large transactions (2+ BTC) require ID verification
- Exchange can be hacked, and your coins were stolen.
Decentralized Trading Exchange
The other way how to invest in Ethereum with other cryptos is to use a decentralized trading exchange. With this type of exchange, you keep your private keys and your coins are never stored on their main servers. Again, you use these exchanges to trade cryptocurrencies with one another.
The most popular are EtherDelta and IDEX.
Pros of Using a Decentralized Exchange:
- You remain in complete control of your private key by connecting your wallet to the exchange
- This type of exchange cannot be hacked and therefore your coins cannot be stolen
- All transactions are anonymous, no matter how large they are
Cons of Using a Decentralized Exchange:
- A lower volume of traders and investors could mean slower transactions
- Only a limited number to coins are on the platform and can be used to trade for Ether
- Usually no customer service
- User interfaces are usually harder to learn
And there you have it - multiple ways of how to invest in Ethereum.
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Conclusions
Right now, I’d recommend Ethereum as a good investment. The prices of most cryptocurrencies have dropped recently, and so has the price of Ether. So, if you are looking at how to invest in Ethereum, now would be a good time to do so.
This year could be a good year for Ethereum. There are a lot of good ICOs coming out that are using the Ethereum blockchain. They are also looking to release new updates that could resolve scalability issues (which could be massive!).
These factors tell us that there is a good chance that ETH will go up in price from where it is now — and that it could be one of the safest cryptocurrencies to invest in right now.
Whether you buy into ETH for the long term or the short term is entirely up to you and what your investment goals are. You can make money with either strategy. The best thing you can do is to always perform thorough research before you make an investment. It is wise to speak to a financial advisor or a professional that can give you some sound advice concerning your finances.
One important rule for all investors is this: only invest what you’re willing to lose. The world of crypto is volatile and young; anything can happen. Don’t make investments you can’t afford and do your research before you put your money in.
For more on Ethereum as in investment choice, see our Ethereum price prediction.
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