cryptoknowmics.com
We have always known Bitcoin as the leading cryptocurrency in the crypto space since the time we first got familiar with cryptocurrencies and blockchain technology. Though there is no denying the fact that Bitcoin is the king of cryptocurrencies, however, one altcoin that possesses the potential to overcome Bitcoin in terms of price and market capitalization is Ethereum. It’s the only name that is going to be there for quite a long from now. With the market capitalization of Ethereum being more than $232 billion at present, it holds the title of second-largest cryptocurrency in the world.
Well, if it is the second-largest digital asset and has the potential to beat Bitcoin in the future. Therefore, it must be there in your investment portfolio. However, if you have some questions and need help regarding how to buy Ethereum, should I buy Ethereum, or how to invest in Ethereum, then this article is for you.
In this article, we are going to cover different methods of buying Ethereum. However, depending upon your choice, you can select the method and decide how to get Ethereum in your investment portfolio.
Ethereum has made its investors quite rich in recent times as the price of the cryptocurrency surged to an extent that you can understand by supposedly considering that if you had invested $1,000 in ETH in August 2015. The $1,000 investment in Ethereum would currently be standing at a whopping $2.23 million in just six years of your investment tenure. But guess what? You did not acquire Ethereum back then, and all that profit-making opportunity is now gone, leaving regrets in your mind. Although the first best time to get your hands on Ethereum has gone, the second-best time is now. So, it’s time to get started with your investment journey in Ethereum and enjoy the future returns of the asset.
How to Buy Ethereum
If you are aware of making investments in stocks, then investing in Ethereum or be it any cryptocurrency is not going to be a task involving rocket science. It is simple, and you just need to follow some steps to see Ethereum growing in your portfolio. However, before making any kind of investment, you should know:
Ethereum, stocks, or any kind of investment, is not a get-rich-quick method, things take time to grow and show their potential. There are always risks in making investments and only if you can watch your portfolio go down by over 50% without panicking or selling assets, then only you should consider yourself eligible and worthy of making investments, otherwise, you would be putting your hard-earned money at risk.
Moreover, cryptocurrencies are both famous and criticized for their price fluctuations and uncertainty. This can either prove to be a boon or a curse for you, depending on the decisions you make. Thousands of dollars worth of money is being liquidated in Ethereum on a daily basis, making it a volatile asset along with marking significant differences in the lows and highs made by the asset on a 24-hour trading chart.
Consider this, the shorter the duration of your investment, the higher will be the risk. The longer you are in the game, the lesser chance you are giving your money to get depreciated.
Moving forward to the steps of investing in Ethereum, here we go:
Choosing a Crypto Exchange
Investing in cryptocurrencies is slightly different from investing in stocks listed on stock exchanges and a bit more complicated than that for sure. As cryptocurrencies are not being traded on exchanges like the New York Stock Exchange or the Bombay Stock Exchange, you need to find a platform that allows you to trade fiat currency in exchange for the crypto asset, which is Ethereum in our case.
- To purchase Ethereum, you first need to create an account on a crypto exchange. There are numerous exchanges out there in the market, but the best ones with global recognition and a user base of millions of registered customers should be preferred. Some of the best crypto exchanges are Binance, Coinbase, Kraken, Gemini, KuCoin, and Bitstamp. However, you get a choice while choosing a crypto exchange, which will be made depending on your privacy preferences. There are two types of crypto exchanges:
- Centralized Exchanges: For an exchange to be termed centralized crypto exchange, it means there is an intermediary for conducting transactions. This is generally contemplated as the safer way of making investments.
- Decentralized Exchanges: Dissimilar to centralized exchanges, decentralized platforms are based on smart contracts, and they offer P2P trading of crypto assets along with providing an allowance of trading almost all the coins available in the market. This eliminates the requirement of giving the steering wheel of your investments to a centralized firm. Some of the popular decentralized exchanges are dYdX, Uniswap, PancakeSwap, and 1inch Liquidity Protocol.
Another crucial aspect to take care of while looking for a crypto exchange is the availability of a suitable crypto wallet.
Adding Funds in Your Account
You need something to trade in exchange for Ethereum, right? Well, that’s the fiat currency sitting in your bank account, which you need to add to your crypto account to buy Ethereum. There are several methods to fund your account, and you can add money through various methods such as debit card, net banking, UPI (in some platforms only), and even P2P transfers.
Before choosing the method to fund your account, you must always look for the fees an exchange and your bank might charge for carrying the transfer. Different funding methods have varying fee structures, and you should always go for the one that fits your wallet.
As for the P2P transfers, they are a good way to avoid transaction charges and pay directly to the other person on the network with Ethereum in fiat currency. However, it should be noted that sometimes, you will be required to place your buy order higher than the current price of the currency to meet a seller and get the transaction executed.
In addition to this, if you choose to fund your account through your credit card, then you must keep in mind that some companies offering credit card services consider crypto purchases as cash payments. Hence, they ask for a higher rate of interest in return. You need to play carefully and in accordance with your expense appetite while funding your account.
Purchasing Ethereum
After funding your account, you are ready to make your first investment in the second-largest cryptocurrency in the world, along with the option to buy Bitcoin and other altcoins on the platform.
While trading on stock markets, mutual funds, and ETFs are limited by market hours, the crypto market is free of time-bound, and you can invest in cryptocurrencies at any hour of the day, provided your exchange is working and is not encountered with any issues.
Search Ethereum on the crypto exchange with the ticker symbol ETH and select the buy option. Here, you will be provided with the option to either purchase the cryptocurrency at the present market rate or determine the price at which you want to buy the asset.
Along with this, you must know that fractional buying is available in the cryptocurrency market too. You can make investments in the assets according to the amount required to take a position in the asset. If you choose to buy a fragment of Ethereum, then the buying window will show you a percentage of the share you are holding.
Storing Your Ethereum
You are done with the buying part and are now watching the asset fluctuate in your portfolio. Well, Great! You are done with the major part of making your first crypto investment. Following the purchasing of the asset, comes the need of storing it. Although a majority of crypto exchanges or the platform you choose will allow you to store your purchased asset on their platform, the security of assets stored on a crypto exchange is always ambivalent. That’s the reason behind some investors going for other methods to store their valuable crypto assets. Though in almost all the hacks executed in history, crypto exchanges or wallets have compensated their clients. Besides, it is not something that you would like to go through to enrich your crypto investment experience. Hence, you should prefer third-party wallets, and they are of two types:
- Hot Wallet: A Hot Wallet can be considered a tool that allows its users to send, receive, and even store their tokens while being attached to the public and private keys that assist in carrying out the transactions with ease along with acting as a reliable course of action.
- Cold Wallet: Also called a hardware wallet, or offline wallet, a cold wallet is considered the safest method to store your cryptocurrencies as it stores the address of the user and private key along with operating in concomitance with compatible software in the computer. The only advantage of a cold wallet over a hot wallet is that it is not directly linked to the internet, which ultimately makes it unhackable and secure.
Selling Ethereum
Well, it won’t be the best investment decision for a long-term investor, it allures the short-term or day traders to sell their held asset at a higher price. If you think you have gained enough from the asset for the time being, and you wish to sell your Ethereum, then you just need to head back to the ETH ticker symbol and select the sell option. In the selling window, either sell your ETH holdings at the current market price or enter your desired price to sell the asset.
Here, you should know that crypto investments are taxable, and you will be liable to pay taxes on your capital gains. However, the taxes charged by the government on crypto gains are of two types:
- STCG: STCG stands for Short Term Capital Gains and, as the name suggests, it is the amount of tax you need to pay if you sell your asset before 36 months of purchasing it. The taxes vary from country to country, and therefore we are not discussing numbers here.
- LTCG: LTCG stands for Long-Term Capital Gains, and it implies that you have held your asset for more than 36 months and the taxable amount is comparatively less. Thus, it is yet another advantage of holding your asset for longer durations.
Conclusion
We have gone through all the steps to answering how to buy Ethereum, holding it, and selling it. Hence, after reading this article, you are now well aware of how to get started with your crypto investment journey. However, it is always advised to do your own research and clear queries before indulging in any kind of investment, especially in the case of cryptocurrencies.
Crypto investments might appear tempting, but there are risks involved due to high volatility. You would not like to encounter losses at just the beginning of your investment journey. So, take your decisions wisely, try to stay invested for as long as possible, make yourself aware of the latest happenings in the crypto world, and avoid making investment decisions based solely on your sentiments.