Although it's been in the news cycle for years, cryptocurrency remains a hot commodity, especially for those with the willingness and resources to make highly speculative investments. Second only to the original token, Bitcoin, Ethereum is the largest cryptocurrency by market capitalization, making it a potentially lucrative prospect at an ETH to USD conversion rate of 1 to 2,580.15.
Preparing to Invest
As Forbes notes, investing in Ethereum, whose token is referred to as Ether (ETH), is straightforward in some ways and somewhat complex in others. Before someone even considers spending any finances on the technology needed to invest in Ethereum, however, they need to determine your acceptable level of risk.
Cryptocurrency is notorious for its frequent price fluctuations, with Ethereum proving no exception. Relatively minor occurrences can have major effects on a token's pricing; for example, when Elon Musk stated on social media that Tesla would not accept Bitcoin as payment, its value dropped 15%. As such, many investment experts suggest prospective investors only put as much into a crypto account as they're willing to lose.
Ether has seen its high points, such as when it rose to nearly $4,000 per coin in May 2021. If someone decides the risk is worth it, they can move on to selecting a crypto exchange. Bear in mind that these exchanges are less prevalent than traditional stock exchanges, so some searching is required, especially for users newer to the crypto scene and less familiar with the process.
Once the individual finds a crypto exchange, they'll notice it looks relatively similar to a standard brokerage platform. It allows the user to trade traditional fiat currencies for cryptocurrencies like Ether. Some of these platforms can prove complex for newer users, though there are more user-friendly alternatives available, albeit at the potential cost of having to pay higher fees for the platform. One feature users should look for is whether an exchange offers a crypto wallet to store investments.
The last step before buying Ethereum is to fund the crypto account from a traditional source like a bank account, whether through checking or savings. Wire transfers, money from PayPal, and debit cards are viable methods. That being said, the fees on each method can change depending on the crypto exchange the user is investing through.
Making the Purchase
Once the user has funds in their crypto account, they can start purchasing Ether. Crypto exchanges are available 24/7 because of their decentralization; they aren't tied to a specific market and aren't beholden to any one market's hours.
The process of actually buying Ethereum is straightforward. Investors will access their exchange of choice, enter the appropriate ticker symbol—ETH, for Ethereum—in the "buy" field, and input how much of the token they wish to purchase. Users can, like with traditional stocks, purchase ETH in fractions or percentages given the price of a single whole coin.
Once the user has purchased Ethereum and it's been processed, they must store the token(s) in either the exchange platform or a removed crypto wallet. This decision generally comes down to security, as cryptocurrencies have been lost through platforms due to hacking.
That said, many major exchanges insure their clients' holdings and keep most of their assets stored offline as a preventative measure against theft. Many exchanges have also reimbursed users after a hack in the past. Still, for those seeking more control over the security of their cryptocurrency, wallets can provide some additional peace of mind.
Wallets are generally divided into two categories: hot and cold. Hot wallets are connected to the internet for greater accessibility via smartphones or computers. This accessibility makes hot wallets more convenient, which is why many platforms tend to have them built in at no additional cost to the user. Users can also use their wallets instead, should they choose. It's important to note that because hot wallets are connected to the internet, they are more vulnerable to security hacks.
Cold wallets, meanwhile, generally work conversely to hot wallets, storing tokens offline instead of through the internet. These external devices can vary in cost, ranging from $50 to $200, with more expensive versions available for even more security.
Though cold wallets lack the quick convenience of hot wallets, as users have to connect them to the internet each time they want to access their crypto, they're generally safer and worth investing in should the user own many tokens.
Selling Ethereum and Considering the Investment
Selling Ether works much the same as buying it, though with the additional complication of taxes. Should a user sell a significant amount of crypto, they should contact a tax professional to discuss how the income may be affected by capital gains taxes since crypto is taxable according to the federal government despite its decentralized nature.
Whether Ethereum and cryptocurrency are worthwhile investments depends on an individual's comfort with volatility and financial security.
Ethereum is the world's second most popular coin, with over 116 billion coins in circulation.
However, this popularity automatically makes it a sound investment, as any cryptocurrency's value can instantly disappear. Of course, the inverse is also true, making Ethereum and other tokens understandably enticing.
Investment experts advise potential investors to consider why they want to invest in crypto in the first place, especially about any other investments they may have. Investors should have a sizable emergency fund to fall back on, a solid retirement account, and minimal debt.
Like all good investors, crypto investors should diversify their portfolios to dilute the volatility inherent to Ethereum and other currencies. Crypto should still be considered the Wild West of investments, with opportunities for gains and losses included.
