The Ethereum blockchain token known as ether (ETH) is one of the world’s top three cryptocurrencies. As of May 2022, it has the second-highest market value at around $246 billion, falling behind Bitcoin's roughly $571 billion; and leading Tether's third-place market cap of about $75 billion.
While cryptocurrency assets shrank in 2018 and 2019 from their December 2017 peak, the crypto market roared back to new highs through 2021, and are now worth many times more than what they were at the previous peak; although there has been a large pullback throughout 2022. There is still a great deal of interest in this space as the market continues to see innovation. ETH’s value was trading at around $2,000 in May 2022, down from November 2021 highs approaching $5,000.
The primary appeal to the digital currency is its integration with the Ethereum Network. Essentially, ETH is the driving force behind the capabilities of the Ethereum Network overall. With the Ethereum Network offering vast opportunities for development, ETH is an investment that many see as more promising than Bitcoin. Ethereum is also backed by multiple Fortune 500 companies and is being used by multiple financial institutions. For all of these reasons and more, many investors are rapidly adding ETH to their portfolios.
Here is how you can incorporate Ethereum into your investing.
- Ethereum is the second-largest cryptocurrency by market cap, worth just under a quarter trillion dollars as of May 2022.
- Ethereum is optimized as a smart contract platform, which runs decentralized applications and tokens like ICOs or NFTs.
- Trading Ethereum's native token, Ether (ETH), can be done online via a number of active exchanges.
- You can now also buy ETH through mainstream brokerage platforms like Robinhood or Paypal.
1. Identify a Platform for Trading
As the basis for placing any trades, it is important to identify the best trading platform for your needs. There are a few options when it comes to cryptocurrencies with some of the top platforms including Coinbase, Kraken, Bitstamp, Gemini, Binance, and Bitfinex. All of these exchanges offer Ethereum.
One of the biggest considerations for choosing a cryptocurrency trading platform is the type of exchange. Cryptocurrency trading platforms can be either fiat exchanges or cryptocurrency to cryptocurrency exchanges (C2C). As one of the two largest cryptocurrencies in the world, investors can trade Ethereum easily on fiat exchanges.
Some investors who want to trade multiple currencies or have the option to convert other currencies easily into Ethereum may want to consider the C2C exchanges more closely. A lot of investors also have multiple accounts with both a fiat exchange and a C2C exchange.
Keep in mind that cryptocurrencies are highly unregulated with rapid innovation. This can create a great market opportunity but also increase the risks of fraud so it’s important to be sure you are confident in the credibility of the trading platform exchange that you choose. A few key questions to ask when considering an exchange include:
- Where is the headquarters?
- Do they have a license?
- How secure is their website?
- How secure are your funds?
- Who are the managing executives?
Worldwide, Binance is the leading exchange by trading revenue. In the United States, Coinbase Exchange tops the list.
The legality of cryptocurrency trading and trading in related products like crypto CFDs or futures may be limited by country or jurisdiction.
2. Create an Account
Once you have decided on a trading platform that fits your needs then the next step is to open an account. This process is similar to opening an account with a brokerage platform. You will need to provide your name, address, social security number, specified forms of identification, and more. Once you are confident with a site, the account opening process can usually be done pretty quickly.
Verifying the account is usually the final step in the account opening process. Most all exchanges will require that you verify your account in one or more ways. This is where you will likely need to upload documents to verify your identity and ensure that your account passes regulatory muster. Verification can take anywhere from approximately one hour to potentially a day or two depending on the exchange.
3. Deposit Currency
You'll next need to deposit currency into your account. For fiat currency platforms, this can be relatively easy after verification of your payment information. Simply add money through your bank account or debit card on file. Cryptocurrency exchanges do not generally have high minimum investments so you can invest as little as $5 or as much as $1,000 or more. Most exchanges have fees per trade so it can be best to trade large amounts at once.
Depositing currency in C2C exchanges can be slightly more difficult. These exchanges require you to send cryptocurrency by code from one location to another. Ethereum is a popular depositing currency for many C2C platforms so holding large amounts of it can be beneficial. Code transfers take slightly longer to complete, typically up to an hour.
4. Begin Trading
With a verified account and money deposited into that account, you'll be able to begin purchasing Ethereum and other cryptocurrencies via the exchange. Each exchange has an interface that works somewhat differently, but be prepared to confirm transactions and then allow for processing time, which can also depend on the total number of transactions requested.
5. Withdraw ETH into a Wallet
Once you have purchased ETH through the exchange, you can withdraw that currency into your bank account or a wallet that you control. Fiat exchanges make it easy to withdraw ETH by simply selling and sending the proceeds to your bank account. C2C platforms take a longer amount of time. On a C2C platform, you would need to code transfer your ETH to a fiat exchange and then sell to cash out. On all platforms, you also generally have the option to send ETH to a wallet.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.