Why invest in Ethereum ETH? What are Ethereum investment pros and challenges? Here is everything you need to know about Ethereum investing.
While most investors in the cryptocurrency arena prefer to stick with Bitcoin - it is important to remember that there are thousands of other innovative digital coins on offer.
At the forefront of this is Ethereum - the second-largest cryptocurrency in terms of market capitalization and trading volume.
As such, if you're looking to diversify into other cryptocurrencies - you can easily invest in Ethereum at the click of a button.
In this How to Invest in Ethereum Guide - we walk you through the purchase process. This includes key steps such as finding a good broker, opening an account, and completing the Ethereum investment online.
If you want to invest in ETH quickly and easily, check out eToro Exchange!
How to Invest in Ethereum in 5 Easy Steps
To invest in Ethereum, the first step is to Open an accout with a regulated exchange, depost funds, select Ethereum from the platform list, and lastly check & confirm that coins have added to your Wallet.
Although we suggest reading this guide all of the way through - some of you might be strapped for time. If so, if you’re wondering how to invest in Ethereum right now - you will find the required five steps below.
Step 1: Open an account with a regulated exchange
Step 2: Deposit some funds with a debit/credit card, e-wallet, or bank transfer
Step 3: Choose how much Ethereum you want to buy
Step 4: Confirm the investment
Step 5: Leave your Ethereum stored until you decide to cash out
By following the five simple steps outlined above - it will take you less than 10 minutes to invest in Ethereum from the comfort of your home!
What is Ethereum?
Although understanding how to invest in Ethereum is super straightforward - we would suggest doing a bit of homework before taking the plunge. In other words, you should clearly understand the ins and outs of what Ethereum is if you are to determine whether or not this cryptocurrency represents a viable investment.
So, Ethereum is a cryptocurrency that was officially launched in 2015. Founded by Vitalik Buterin, the Ethereum project carries a lot of similarities with Bitcoin - which was created six years earlier.
For example, both Ethereum and Bitcoin are digital currencies that operate on top of the blockchain protocol. Both allow you to send and receive funds via a digital wallet, and crucially - both are decentralized networks that are not controlled by any single person or authority.
However, it is important to note that Ethereum possesses more capabilities than its Bitcoin counterpart. For example, the underlying blockchain protocol allows you to create and deploy ‘smart contracts’.
In Plain English - this allows users to perform decentralized and trustless agreements above and beyond just financial transactions. Additionally, Ethereum transactions are typically confirmed in just 15 seconds, while Bitcoin takes 10 minutes.
We should also note that thousands of other cryptocurrencies - known as ERC-20 tokens, have been built on top of Ethereum’s proprietary blockchain.
Taking all of the above into account, it comes as no surprise that Ethereum hit all-time highs in 2018 - translating into a market valuation of $130 billion. To put that into perspective, this is more than the vast majority of S&P 500 stocks.
How Does the Invest in Ethereum Process Work?
The best thing about investing in Ethereum is that the process itself does not differ from a traditional stock purchase. In other words, you will be investing in Ethereum because you think the value of the cryptocurrency will increase.
If and when it does, you will be able to sell your Ethereum investment for more than you originally paid. For example, you might invest in Ethereum when the digital currency is worth $600 - and cash out when the price hits $900.
As such, this is no different from buying Tesla stocks at $400 and selling them at $500 - you make a profit when the value of Ethereum goes up!
Nevertheless, let’s look at a really basic example of how to invest in Ethereum online and make a profit.
- You open an account with an online broker that sells Ethereum
- You deposit $1,000 and invest the full amount into Ethereum
- At the time of the purchase, Ethereum is worth $300
- You hold on to the coins for three years
- When you get around to cashing out, Ethereum is worth $1,200
- This translates into a price increase of 300%
As per the example above, you originally invested $500 into Bitcoin and made returns of 233%. This means that in total, you turned $500 into $1,665.
As the above example highlights, you initially invested $1,000 into Ethereum. When you did, the digital currency was worth just $300.
But, as you sold your Ethereum holdings at a price of $1,200 - you made a juicy profit of 300%. This means that on a stake of $1,000 - you were able to withdraw $4,000!
Why Should you Invest in Ethereum?
There are many reasons why you might decide to invest in Ethereum.
This includes the following:
5-Year Returns are Through the Roof
When Ethereum was first launched in 2015 and eventually hit the online exchanges - you would have paid in the region of $2.60. Fast forward just two years later and the digital currency reached all-time highs of almost $1,400.
This means that in just over two years of trading, earlier Ethereum investors saw returns of over 53,000%. This means that had you invested in Ethereum at a stake of $1,000 - your money would have been worth over half a million dollars.
With that said, the price of Ethereum tailed off for a couple of years - reaching lows of sub-$100 in 2019. However, the digital currency is back flying again - going from 2020 lows of $117 to highs of $600. This means that in 2020 alone Ethereum investors saw returns of over 400%.
In comparison, other than the odd tech stock like Tesla, traditional investors have had a hard time. Owed largely to the coronavirus pandemic, the main index funds are only just about getting back to pre-COVID levels.
Ethereum can be Fractionated
Although Ethereum breached $600 in late 2020 - this isn’t to say that you need to invest this much to gain exposure to the market. On the contrary, Ethereum - like all other cryptocurrencies, can be fractionated into smaller quantities.
After all, cryptocurrencies are digital - so it makes sense that you can break coins down to smaller, more affordable amounts. With that being said, the minimum amount that you can invest will largely depend on the broker you decide to use to invest in Ethereum.
If, however, you want to start off with small amounts, we would suggest eToro. This is because the regulated broker allows you to invest in Ethereum from just $25. Not only is this an inconsequential amount, but it allows you to diversify into other cryptocurrencies/assets with ease.
Ethereum Smart Contracts Could Play a Major Role in the Future of Commerce
Although somewhat difficult to understand to the untrained eye, smart contracts are not as complex as they sound. In its most basic form, smart contracts allow two or more parties to enter into a trustless agreement.
This is because they are backed and governed by cryptographic code. In simple terms, the terms of the agreement are clearly stated within the respective smart contract and it cannot be amended or manipulated once deployed.
A simple, but effective example of how a smart contract might work in practice is listed below.
- Let’s say that a farmer purchases an insurance premium via a smart contract
- This is with the view of protecting the farmer’s crops in the event of unfavourable weather conditions
- The smart contract contains all the required conditions of the agreement - so it’s transparent to all parties involved
- One such condition is that if there is no rain for 10 consecutive days in the farm’s respective location, the insurance premium pays out
- The smart contract can determine this autonomously by using thousands of third-party weather sites to verify whether or not it has rained and for how long
- Should the condition of the smart contract be triggered, the farmer executed a payment
The reason we have explained the above example is to highlight that Ethereum’s smart contract technology could one day be in high demand. If it is, smart contracts require Ethereum tokens to function - which in turn, will increase demand, and thus - its value will increase.
Ethereum 2.0 is a hugely important stage of the project’s journey. It upgrades and improves a lot of specifications that the blockchain currently possesses. Through several rollout phases, Ethereum 2.0 is expected to be fully operating within the next year or two.
Nevertheless, Ethereum 2.0 will be able to take the cryptocurrency from a maximum capacity of just 15/16 transactions per second (T/ps) to a whopping 100,000 T/ps.
When you combine this with an average transaction speed of 15 seconds, this makes Ethereum highly conducive for cross-border transactions. This is especially the case when you consider the minute costs associated with an Ethereum transaction.
Would you consider investing in Ethereum ETH?
How to Invest in Ethereum - Various Options Available
If you’re wondering what the easiest, safest, and most-effective way to invest in Ethereum - that’s through a regulated online broker. But, it is also possible to invest in Ethereum via a cryptocurrency ATM.
Let’s explore how this works.
According to CoinATMRadar, there are over 12,500 cryptocurrency ATMs globally. This allows you to purchase cryptocurrency by inserting cash into the machine.
Of this figure, there are thousands of cryptocurrency ATMs that support Ethereum investments. This might suit those of you that want to buy the digital currency with local money.
Here’s how the Ethereum investment works when using a cryptocurrency ATM:
- You visit your nearest cryptocurrency ATM
- You get the process started by selecting Ethereum as your preferred coin
- You enter the amount that you wish to invest in your local currency
- For example, if you’re in the US and want to invest $200 into Ethereum, simply state this amount
- The cryptocurrency ATM will then show you what fees are involved and how much Ethereum you will get
- For example, if the ATM charges 10%, you’ll be left with $180 worth of Ethereum at the current ETH/USD exchange rate
- You insert the cash into the ATM
- The ATM prints your receipt - which contains the Ethereum wallet details that you need to claim the coins
Now, on the one hand, you might be led into thinking that a cryptocurrency ATM is a really convenient way of investing in Ethereum. However, if you’re based outside of a major city in the US, Canada, or Europe - you might struggle to find a machine close to your location.
Furthermore - and perhaps most importantly, cryptocurrency ATMs are very, very expensive when it comes to fees. As per the example above - where we stated a fee of 10% - this isn’t unusual. In fact, some cryptocurrency ATMs selling Ethereum are known to choose as much as 20%.
We should also note that you need to go through the trouble of downloading a digital wallet to claim your Ethereum coins. While this might be suitable for those of you that understand how wallets and private keys work - it won’t if you are a complete beginner.
This is why we strongly believe that the easiest way to invest in Ethereum is to use a regulated online broker.
If you want to safely and conveniently invest in stocks - you use a broker. This is also the case with other asset classes like bonds, mutual funds, and ETFs. As such, it makes perfect sense that you should use an online broker to invest in Ethereum.
For example, you’ll be able to deposit funds with an everyday payment method like a debit/credit card or bank account. Some brokers even accept e-wallets like Paypal and Skrill. Online brokers are, of course, required to hold the required license to accept facilitated investments. This is no different from online brokers offering legitimate cryptocurrency services.
You will also find that the fees charged by Ethereum brokers are significantly lower than other channels - especially the previously discussed cryptocurrency ATMs. In fact - and as we cover shortly, there are platforms like eToro that allow you to invest in Ethereum commission-free.
Taking the above into account, the section below will explore the many things that you need to look out for when choosing an online broker to invest in Ethereum.
How to Choose a Platform to Invest in Ethereum
As great as online cryptocurrency brokers are, there are simply too many providers active in the space. This makes it challenging to know which platform to sign up with.
The most important metrics to consider are listed below:
Licensing and Reputation
As we mentioned above, one of the main reasons that you buy traditional stocks from a regulated broker is that you know you are protected from rogue providers. This is no different when you invest in Ethereum online.
After all, you wouldn’t invest your hard-earned money into a broker that operated without a license, would you? Of course not.
As such, you should stick with cryptocurrency brokers that are regulated by at least one reputable body. This is why eToro ticks the right boxes - as the broker holds licensed with the FCA, CySEC, and ASIC.
If you’re based in the US, you’ll be pleased to know that eToro is also registered with FINRA. As such, by using eToro to invest in Ethereum, you’ll benefit from segregated bank accounts - which ensures that your money is kept separate from that of eToro’s working capital.
You can also rest assured that crime is kept away from the platform - as all eToro users must upload a copy of their government-issued ID.
Minimum Ethereum Investment and Payments
Make no mistake about it - Ethereum is a highly speculative financial asset. Sure, the cryptocurrency returned gains of over 400% in 2020. But, Ethereum has also returned annual losses in excess of 80%.
As such, it’s always best to start off with small, but regular amounts. In doing so, you can deploy a ‘dollar-cost-averaging’ strategy. Now, for you to be able to do this, you need to choose a cryptocurrency broker that supports low investment amounts.
eToro, for example, allows you to invest in Ethereum from just $25. As it requires a minimum deposit of $200 - this means that you can allocate $25 per week for 8 weeks in a row.
Equally as important, you also need to check what payment methods your chosen Ethereum broker supports. In our view, you’ll want to choose a platform that allows you to make an instant deposit with a debit/credit card.
Platforms like eToro also support e-wallets like Paypal, Skrill, and Neteller. If, however, you choose a broker that only supports bank transfers - it’s going to take a few days for the transaction to clear.
Storage and Cashing Out
As we noted earlier, Ethereum - like all cryptocurrencies, needs to be stored in a digital wallet. This is where newbie investors are often intimidated, as cryptocurrency wallets can appear somewhat complex at first glance.
For example, you need to have a basic understanding of public addresses and private keys. You also need to be comfortable with backup passphrases and ultimately - the ins and outs of keeping your funds safe.
If this sounds like too much to handle, we would suggest using a regulated cryptocurrency broker that can store your Ethereum for you. eToro is one such example - as the broker uses institutional-grade security practices.
And of course, by keeping your Ethereum coins at eToro - as opposed to withdrawing them out to a private wallet, you can instantly cash out your investment whenever you see fit. Then, the proceeds will be added to your eToro cash account - ready to be withdrawn.
Ready to invest in Ethereum ETH?
Tips on How to Invest in Ethereum and Make a Profit
If you’re investing in Ethereum for the very first time - check out the quickfire three tips listed below to ensure you start off on the right foot!
Tip 1: Set Some Financial Goals
Firstly, you should set yourself a target when you invest in Ethereum. For example, if you invest when the digital currency is worth $600 and you want to 10x your money - be ready to cash out if and when Ethereum hits $6,000!
Tip 2: Dollar-Cost Average Your Ethereum Investments
As we briefly noted earlier, you should always use the cost average when you invest in Ethereum. This will average out your cost price and thus - remove the need to worry about short-term volatility.
A basic example of dollar-cost averaging is buying $100 worth of Ethereum on the same date of each month.
Tip 3: Diversify Your Ethereum Investment
Like any investment, you should always diversify your Ethereum purchase. For example, eToro offers 15 other leading cryptocurrencies - so why not create a diversified portfolio of coins? In doing so, you’ll reduce the risk of loss should your Ethereum not quite go to plan.
How to Invest in Ethereum Today - Step-by-Step Walkthrough
Wondering how to invest in Ethereum in the safest and most convenient way possible? By following the steps outlined below, you could buy your first Ethereum coin in just a few minutes!
Step 1: Open an eToro Account
Visit the eToro website and begin the account registration process. You’ll need to enter your name, nationality, home address, date of birth, and contact details.
Step 2: Upload Some ID
You’ll now be asked to upload a copy of your passport or driver’s license. You’ll also need to provide a document validating your address - like a bank account statement. This is to ensure that eToro remains compliant with the FCA, ASIC, CySEC, and FINRA!.
Note: If you are not depositing more than $2,250 right now, you can upload the above documents at a later date.
Step 3: Make a Deposit
You will now need to deposit a minimum of $200.
Supported eToro payment methods include:
- Debit Card
- Credit Card
All of the above payment methods are credited instantly. If you opt for a bank transfer, expect to wait a few days for the funds to arrive.
Step 4: Search for Ethereum
eToro offers thousands of stocks, ETFs, CFDs, and cryptocurrencies. As such, it’s easier just to search for ‘Ethereum’ and click on the result that loads up.
Step 5: Complete Ethereum Investment
You will now be presented with an order form. Simply enter the amount that you wish to invest in Ethereum and click on the ‘Open Trade’ button.
Take note, all investments at eToro are denominated in US dollars and the minimum Ethereum purchase is $25.
And that’s it - you’ve just learned how to invest in Ethereum at eToro - commission-free!
Step 6: Cashout Your Ethereum Investment
When you get around to cashing your Ethereum investment out - whether that’s in a few days, months, or even years - all you need to do is head over to your portfolio dashboard.
Then, click on the ‘Sell’ button, enter the amount that you wish to cash out, and confirm the order. Instantly, the funds will be added to your eToro account - which you can withdraw out!
eToro – The Best Platform to Invest in Ethereum
eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
How to Invest in Ethereum - The Bottom Line
Although the vast majority of newbie cryptocurrency investors opt for Bitcoin - the upside potential on Ethereum could be much greater. After all, Ethereum’s underlying technology is arguably a better performer - both in terms of speed and scalability. Additionally, Ethereum possesses Smart Contract technology - which is something that Bitcoin is lacking.
With that in mind, if you want to invest in Ethereum right now - the process takes just 10 minutes at eToro. All you need to do is open an account, deposit some funds, and invest at least $25 in Ethereum. By opting for this multi-regulated broker - you’ll be investing commission-free, too!
How much should I invest in Ethereum?
There is no hard and fast rule as to how much you should invest in Ethereum. The most important thing is that you never invest more than you can afford to lose. After all, Ethereum - like all cryptocurrencies, is a highly speculative financial asset.
Is Ethereum a good investment in 2021?
Nobody knows what the future holds for Ethereum. But, bearing in mind that the cryptocurrency was worth just $2.60-ish in 2015 and has since hit highs of $1,400+ Ethereum is growing at an unprecedented rate.
How do I start investing in Ethereum?
All you need to do is open an account with eToro, make a deposit of at least $200 with your debit/credit card or e-wallet, and invest at least $25 into Ethereum. The end-to-end process should take you less than 10 minutes.
Can I invest $100 in Ethereum?
Yes, you can invest as little as you like - as long as you meet the minimum stipulated by your chosen broker. At eToro, that’s just $25.
Can you lose money on Ethereum?
You can lose money of any asset class - whether that’s established high-grade stocks or Ethereum. This is why you should have a firm understanding of the risk before taking the financial plunge.