How To Make (or Lose) Money With Ethereum (ETH)?

Last Updated January 7th 2022
8 Min Read

Did you know that 6 years after launch, Ethereum now has an overall ROI of 113,922.55%? Did you also know that its price has appreciated by more than 164.48% in the last 12 months?

These statistics are enough proof that Ethereum can make you rich and that in its journey here, it has made numerous ETH investors and traders ultra-rich. A case in point is 25-year-old Cooper Turley, who said, in an interview with CNBC, that investing in ETH while it was trading around $100 per token has made him a millionaire today.

Further, Ethereum has already overtaken Bitcoin to become the most used blockchain network. Most analysts are thus convinced that it is only a matter of time before Ethereum dethrones the pioneer digital currency to become the largest and most valuable cryptocurrency. This also implies that ETH will continue making its investors money in the future.

But how do you start making money with Ethereum today? Even more importantly, how can you lose money with Ethereum? Note that in order to keep your ETH investment safe, you need to learn the different ways in which people have lost money with ETH in the past and how to avoid them.

We address both topics in this ETH investment guide. Read on.

Ways To Make Money With Ethereum (ETH)

Before detailing the different ways you can create wealth with Ethereum, we first need to point out that the crypto coin was not intended to serve as an investment product. It was supposed to be the native token for the Ethereum network, created to facilitate transactions within the network. The fast-paced growth of the network, however, saw the coin’s demand and prices increase sharply over time, effectively attracting the attention of speculative investors.

Here are the different ways of making money with ETH:

Trading

By trading Ethereum ETH, you are essentially buying the coin when you believe it is lowly priced and selling it when this price rises. You then wait for its price to fall and repeat the process, scoping a little profit with every closed position. Advanced traders, especially ETH derivative traders, can trade any direction by going long (buying) when they believe ETH prices will rise and shorting (sell) if they believe ETH prices will drop.

Trading ETH and most crypto has minimal barriers to entry. To get started, you only need to create an account with an exchange/broker, verify your identity, deposit funds, and begin trading. You even have the option of trading ETH CFDs, whose biggest advantage is that it requires minimal trading capital and gives you access to leverage (borrowed funds).

Buying and HODLing

Also known as long-term investing, HODLing involves buying Ethereum ETH today and holding onto it for a long time, waiting for its prices to reach unprecedented heights. To be a HODLer, you first need to be an Ethereum believer, confident that ETH token prices will rise eternally.

In such a case, you buy as many ETH tokens as you can and lock them in a safe hardware wallet, then watch as their value rises over the years. You could then treat the holdings as a retirement plan or as an inheritable estate for your dependants. To illustrate how you can make money HODLing ETH, we look at two examples.

If you had bought ETH worth $1,000 five years ago (September 2016) when it was trading around $10, that investment would have appreciated by 38600% to reach $386,000 today. Moving forward, crypto experts polled by Finder are confident that ETH’s value may rise by more than 473% to reach $18,000 per coin by the end of 2025. If you invest $1000 in ETH today and this prediction comes true, your $1,000 will grow to $4,730 by December 2025.

Staking

You could also make money by staking Ethereum coins. Today, there are multiple reputable DeFi protocols that pay you interest when you lock your ETH holdings in their investment programs. Look at it as depositing cash in a bank in a high yield savings account or entrusting it with a hedge fund that promises a guaranteed return on investment after a specific period.

Over the next few years, staking is expected to become even more popular, especially when the larger Ethereum network shifts from the proof of work consensus algorithm and embraces the proof of stake consensus algorithm.

Mining ETH tokens

You could also take advantage of the proof of work algorithm and use it to earn free ETH tokens before its eventual replacement by the Proof of stake algorithm. For this, though, you will need a powerful computer that you can use to join an Ethereum mining pool.

In these pools, the mined ETH is shared among members - based on their contribution of computational power. You could also invest in mining hardware about it solo (we would discourage you from making such a substantial investment at the moment, seeing that mining is about to end).

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Ways to Lose Money With Ethereum (ETH)

Just as the internet is awash with success stories of individuals and enterprises that made a fortune investing in ETH, there also are numerous tales of the underside to ETH investing. Stories of individuals who got burned and lost a lot of money with Ethereum. Here are some of the ways people have lost money with ETH and how you can protect your investment.

Trading

Ethereum trading presents you with one of the easiest ways to make and lose money. In most cases, you lose money when you enter into a position expecting ETH token prices to rise, but then they dip.

Here is an example, if you buy one ETH today at $3,239, expecting it to rise, but then negative news about crypto forces a sell-out that pushes its prices to $3,000, you will have lost $239 in minutes or a few hours. The loss is even greater and can even leave a negative balance if you were margin trading.

Hacking

Hacking has become a menace in the crypto industry. Today, a lot of individuals have taken up hacking as a career and often target cryptocurrencies like Ethereum because of their high value. They also target digital wallets for individual investors, personal data held by wallet service providers, crypto exchanges, and even DeFi platforms that offer ETH staking services.

To shield your ETH investment from loss to hackers, crypto experts advise that you start by investing in a hardware wallet. They also advise that you move your ETH assets from the crypto exchange, especially if they haven’t insured client digital assets, and store them in offline hardware wallets. Equally important, use strong and unique passwords for your wallet and crypto exchange accounts. Where possible, enable multi-factor authentication.

Scams

Crypto scams like Ponzi and pyramid schemes, phishing, and rug pull scams have also increased tremendously in the past few years. The Federal Trade Commission (FTC), for instance, noted that between October 2020 and May 2021, more than $80 million worth of crypto had been lost to scammers, with the average investor/trader losing $1900. It is important to note that most of these scams target popular coins like BTC and ETH.

You can, however, protect your ETH investment from scammers by avoiding all the get-rich-quick schemes. If you must invest your ETH holdings, vet the investment platform thoroughly and seek expert opinions about the reputation and effectiveness of the security measures around their platform.

Check out: 26 Reasons Why You Should Invest in Ethereum Today

Bottom Line: How To Make (or Lose) Money With Ethereum

Ethereum is as lucrative as it is risky. There are as many ways of making money with the second largest cryptocurrency as there are of losing it. Therefore, it is not enough to learn and embrace the different ways of creating wealth with Ethereum. If you are to keep the fortune earned, you need to learn how others have lost their Ethereum in the past and take practical steps to safeguard your ETH investment. 

Read More:

Will Ethereum Make Me Rich In Ten Years?

What's the Future of Ethereum?

Is Ethereum a Good Buy?

Is It Worth Staking Ethereum?

Is It Too Late To Buy Ethereum?