Is It Better To Invest Or Trade Ethereum?

Last Updated January 7th 2022
18 Min Read

A few years ago, nobody took much notice of cryptocurrencies. Most people believed cryptos were a fad or a scam. But when Bitcoin reached the dizzy heights of $20k in December 2017, suddenly all cryptos were on the public radar.

People began wondering, 'if Bitcoin can make so many millionaires, can crypto make me rich?'

The trouble was that, back in 2017, it was still complex to buy and invest in cryptos. Some platforms offered a variety of cryptos, but others had fewer cryptos. It was hard to understand what crypto was and how to store something that isn't a physical product?

Warren Buffet's advice is never to buy something you don't understand, and, even now, the vast majority of the public is baffled by cryptocurrencies and has no conception of the potential for cryptos.

As you're reading this article, we'll assume you grasp the future potential of investing in cryptocurrencies. Or you may be interested in trading cryptocurrencies. These are two different vehicles for cryptos, so we will explore the differences between trading and investing in Ethereum.

In March 2020, you could buy Ethereum for $87. For the remainder of the year, Ethereum made steady gains.

The last half of 2021 saw a bull run for most cryptocurrencies. The price of Ethereum reached a new high of $4,800. But, from December, the prices in the whole market started dropping. For the following weeks, liquidity and volume for cryptos were low, an unsuitable environment for trading Ethereum.

Now, however, Ethereum is recovering, trading above the $3K mark for a while.

Ethereum is also in the process of an upgrade to Ethereum 2.0. A lot seems to be riding on the upgrade because Ethereum transitions to proof of stake (PoS) consensus. The upgrade eliminates the need for miners but increases the demand for staking in Ethereum to support and secure the network. On completion, transaction speeds increase considerably.

In short, there's a lot to know about Ethereum. As the #2 listed cryptocurrency, some crypto analysts are foretelling that Ethereum could rise as high as $20k by 2030 and supersede Bitcoin by market cap.

The decisions you make right now about Ethereum may impact your future significantly.

In conclusion of this guide, you can decide to trade Ethereum or determine if it is worth investing in Ethereum.

Or you may conclude it is possible to trade AND invest in Ethereum.

If you want to invest in Ethereum quickly and easily, check out eToro!

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

Contents

What Is Ethereum?

Ethereum is an open-source software platform that allows users to build a variety of decentralised applications. It works through a blockchain network. It can run the programming code of other decentralised applications like payment methods, voting systems and security programs.

Ethereum is the #2 listed cryptocurrency founded by Vitalik Buterin in 2015.

Ethereum enables smart contracts using the EVM (Ethereum Virtual Machine). Smart contracts are scripts of code allowing money exchanges, sharing, content or anything of value to others. The smart contract acts as an automated computer program on the blockchain without external influence or censorship and no downtime.

How Does Ethereum Work?

Like most first-generation cryptos, Ethereum was proof of work consensus, which meant the involvement of miners to secure the network and validate transactions.

This form of mining is proof of work (PoW), but it's costly and time and energy-consuming. Ethereum is now transitioning to proof of stake (PoS) protocol, eliminating the need for miners.

In December 2020, the first phase of the upgrade was completed. This phase is the Beacon chain component. Later this year, or early next year, the next step should complete. According to the Ethereum website, the finalisation of the upgrade will be sometime in 2022. The transition to proof of stake (PoS) ensures greater scalability and faster transaction speeds.

From that point, anyone can stake Ethereum and earn Eth tokens as rewards.

To find out more on staking Ethereum, refer to our article on how to stake Ethereum.

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

Is Ethereum A Good Investment For 2022?

Is Ethereum a good investment?

Right now, is it a good time to invest in Ethereum?

Top investors tell us that it's impossible to time the market, which novice investors try to do. How do you decide when to invest in Ethereum, and what is a good price to buy Ethereum?

If we look back at Bitcoin for a moment, look at all the opportunities to buy Bitcoin at basement prices. You could have bought Bitcoin for a few dollars, a few hundred dollars or a few thousand dollars and still made a nice profit at the high of $68k. So what constitutes a reasonable price to buy Ethereum?

Today, the price of Ethereum is $3,239. A few weeks ago, ETH was $3,144. Was that the best price to buy Ethereum?

How about back in March 2020 when you could buy Ethereum for $86. If you had purchased 1000 ETH for $86,000, you could have sold your ETH in May 2021 for $4,300,000.

Buying a hundred ETH costing $8,500, you'd have pocketed $43k.

Some crypto industry experts suggest that Ethereum could rise as high as $20k before 2030. Is today's price of $3,200 a good time to invest in Ethereum?

As an investor, your investment plans and budget will dictate your risk tolerance and subsequent investment decisions. For instance, if your investment budget is $10k, lumping $6,800 into Ethereum is a considerable risk because it has taken most of your budget.

If you have a $100k investment budget, $6,800 is less than 10% risk, although professional investors suggest risking no more than 5% on one investment. Is it worth investing in Ethereum right now? It's a question only individual investors can answer, and it depends on your belief in Ethereum.

If Ethereum reaches $20k or beyond, today's price of Ethereum is worth investment. But, future price projections can only ever be speculative. What's to say, the price of Ethereum could fall back to less than $100? Nobody can predict the future, not even crypto experts.

Is it better to invest or trade Ethereum? Let's examine how to trade Ethereum and find out if trading Ethereum is worth it.

Check Out: Will Ethereum Be Worth More Than Bitcoin By 2030?

Is It Worth Trading Ethereum?

Successful trading depends on price fluctuations in the market.

Cryptos are unpredictable, as you know. Crypto traders need volatility to make profits, but it takes trading experience to analyse price action in the right direction.

For instance, looking at the charts for Ethereum in July 2021, we can see some uncertainty.

eth/usd daily chart

The above image is the daily chart for ETH/USD.

Focusing on the green box, from the third week of May 2021, ETH/USD was ranging, with the low at around $1680. 

The price stayed below the daily 50 EMA (blue line) for two months, showing lower highs and lower lows.

Initially, the price tested the 200 EMA (red line).

The second test dropped below the 200 EMA (to $1680) then pushed back from the 50 EMA (blue line). 

$1680 tested a third time, and now the price was teetering on top of the daily 50 EMA at around $2,330.

The positives for an emerging trade setup were that the 50 EMA and 200 EMA lines were closer together. The price action was evening out.

But there was not enough on the daily chart to indicate a high probability trade. The third from the last candle rejected a higher price. The candles for the last two days were small and weak.

In this situation, the best thing to do is to drop down to a lower timeframe to assess further.

So let's analyse the ETH/USD 4-hour chart for the same period and take a closer look at price action.

eth/usd 4-hour chart

OK, only two lines were touching on the descending trendline. But, several things line up:

  1. There was a double bottom (although the last low was equal to the previous low)
  2. The daily 50 EMA & 200 EMA were touching and could have been about to cross
  3. Oscillators were above 80 (novice traders assume overbought equals a reversal. The market, however, disproves this trading theory many times. Indeed, at these levels, it's more of an indication of increased momentum)

The trade wasn't ready yet because the price was still at the level of the last daily high, which could be an area of resistance. If the price breaks above, making a higher high and a higher low, the probability increases for the price to move to the upside.

Ethereum offers excellent opportunities for trading. But, there's no point trying to take a trade where one does not exist. In the summer last year, most cryptocurrencies have moved sideways. Typically, a ranging market offers no opportunities, but the ETH/USD range was significant enough to provide high probability trades.

Don't Miss: Ethereum Price Predictions

How Do I Start Trading Ethereum?

Above, we looked at the 4-hour and daily chart. But Ethereum trading for beginners on the higher timeframes can present challenges. The best thing to do is analyse the higher timeframes to know the current trend and get an overall picture.

Ethereum trading strategies do not need to be complicated. Indeed, the simpler, the better.

On your Ethereum trading platform, map out support and resistance areas for ETH/USD. Draw in trendlines or insert a box to show a ranging market.

You may not find great trades on the daily chart, but if you want to day trade cryptocurrencies, move down to the 1-hour chart.

eth/usd 1-hour chart

Above is the 1-hour chart for ETH/USD in July 2021

Many trading ETH/USD opportunities appear when using the 50 EMA and 200 EMA.

  1. Trade One - The 50 EMA and 200 EMA crossover, and price retests the 200 EMA
  2. Trade Two – the price retests the 200 EMA
  3. Trade Three – the price retests the 200 EMA
  4. Trade Four – here we see a change of direction for ETH/USD. The 50 EMA crosses the 200 EMA and then retests the 50 EMA

These four potential trades are several hundred pips each. They would have netted a very nice profit for a cryptocurrency trader.

Using two EMAs is a simple strategy. Even though moving averages are lagging indicators, these two EMAs working together can produce excellent results.

We outline the exact strategy below for making profits from trading Ethereum.

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

The Moving Average Crossover Strategy For Ethereum Trading

How do you profit from trading Ethereum?

Simple is best. There is no need to try to reinvent the wheel for trading ETH/USD.

The moving average crossover strategy comprises two EMAs (Exponential moving averages). EMAs are more dynamic than SMAs (simple moving averages).

You don't need to change any settings for the EMAs. Use the default settings.

The 50 EMA tracks the price of the previous 50 candles. So on a daily chart, it would measure 50 days of candles. The 200 EMA tracks the last 200 candles, so it measures 200 days of price action.

The Profitable Strategy For Trading Ethereum

  1. Add the 50 EMA and the 200 EMA on your charts, with a different colour for each
  2. Track the EMAs on the daily chart to assess the trend
  3. Wait for the price to retest the 200 EMA
  4. When the EMAs crossover on the daily chart, drop down to the 4-hour chart and assess price action. If swing trading, base your trades on this chart, or you may find a better entry on the 1-hour chart
  5. On the 1-hour chart, look for crossovers and retests of the EMAs (always keep an eye on the daily chart to look for anticipated compression of the EMAs when the price flattens out

As price continues in one direction, the gap widens between the two EMAs. Close your trades if the lines begin moving closer together. It may be a retest of one of the EMAs, but don't allow your profits to dwindle. You can always enter the market again.

The moving average crossover strategy is more suited to Ethereum swing traders or day traders for Ethereum. It can work for scalping Ethereum but could be less accurate.

Recap Of Is It Better To Invest Or Trade Ethereum

The truth is it is sometimes better to trade Ethereum and sometimes better to invest in Ethereum.

When the price of ETH is stalling, there is no point in trading Ethereum.

You could stake Ethereum for an average of 5% APY. But the problem with staking Ethereum is that, right now, if you stake Ethereum, you cannot access your ETH until the Ethereum upgrade completes in 2022. If you'd like to learn more about staking Ethereum, read our Is It Worth Staking Ethereum article.

So, if you cannot trade Ethereum and can't access your ETH if staking Ethereum, is it best to invest in Ethereum?

The short answer is yes, probably. With the completion of Ethereum 2.0, gas fees for Ethereum transactions will reduce. Gas fees (the price you pay for ETH transactions) have, to date, been costly.

When Ethereum transitions to proof of stake (PoS) consensus, Ethereum miners are no longer needed to secure the network.

Currently, the Ethereum network can manage a dismal 15-45 tps (transactions per second). But the suggestion is that following Ethereum 2.0 upgrade, the tps could increase to 100,000 tps.

VISA transactions are around 1,700 tps.

After the ETH2 upgrade, anyone can stake Ethereum, helping to secure the network.

As people buy into the concept of making money from Ethereum, more people will buy a stake. A demand for Ethereum will push up the price. Ethereum is already the #2 listed cryptocurrency by market cap.

Could Ethereum become the leading cryptocurrency? It's a real possibility because Bitcoin is a proof of work (PoW) consensus and is a significant drain on earth's energy resources.

ETH2 completion signifies scalability, which, again, leads to greater demand and higher prices.

The potential growth for Ethereum hinges on the success of the ETH2 upgrade. Should there be delays, Ethereum followers could lose confidence. If the upgrade completes on time, the price of Ethereum could rocket.

If you are a novice investor and you want to invest in Ethereum, accept that the price of ETH is unlikely to move in a straight line. Cryptocurrencies are volatile. Prices dropped considerably starting December and are just now starting to recover. You must ride the wave and consider investing in Ethereum for the long term.

If you want to day trade Ethereum or swing trade Ethereum, keep your strategies simple. Monitor price action on the daily chart. Check the fundamentals, especially relating to the ETH2 upgrade and watch the crypto news. Be aware that negative or positive media coverage WILL affect the short-term price of Ethereum.

Is it better to invest or trade Ethereum? Ultimately, weigh up the details in this guide and decide to do one or both.

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Trading or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Trading Education.

eToro – The Best Platform To Buy Ethereum 

eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.

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

Read More:

Will Ethereum Make Me Rich In Ten Years?

26 Reasons Why You Should Invest in Ethereum Today

Is Ethereum The Future Of Blockchain Technology?

Is Ethereum Expected to Reach $10,000 or More In The Next 5 years?

Is Ethereum a Good Buy?

FAQs

What is Staking?

To stake Ethereum, you can become an independent validator with an entry cost of 32 ETH, or you can buy Ethereum from a broker or exchange with staking options for cryptos.

It's a simple process. You are buying a stake in Ethereum, and with your purchase, you help secure the network. You earn ETH token rewards, up to 5% a year. If you believe in Ethereum, staking can be ideal for gathering up ETH to build your investment.

Read our article on how to stake Ethereum

Is Ethereum a cryptocurrency?

Ethereum is the network, the digital platform, and Ether (ETH) is the token. The price of ETH is in U.S. dollars (ETH/USD)

Is Ethereum Traded on the Stock Market?

No, Ethereum is a decentralised digital currency (DeFi). No cryptocurrencies trade on the stock market, which is heavily regulated.

How Much Can I Make if I Invest $100 in Ethereum Today?

Ethereum today is $3,739, so you are investing in a tiny portion of ETH.

Crypto industry experts suggest the price of Ethereum could be $20k by 2030. That's a ten times multiplication. Multiply $100 by ten, and you have $1000.

There are no guarantees that Ethereum could, one day, reach five figures.

How do you Profit from Trading Ethereum?

You make money from the price fluctuations of Ethereum. If you purchased ETH today at $2330 and the price rose to $2440, you would make $100.

Trading cryptocurrencies can be challenging. Ethereum trading for beginners is risky until you gain trading experience. You can practice with a demo account and learn with a trading course. Whether you are trading Forex, stocks or cryptos, the principles are the same.

Should I Buy Bitcoin or Ethereum?

Ethereum has experienced greater growth than Bitcoin during the last year. With the rollout of Ethereum 2.0, the differences between Bitcoin and the Ethereum network becomes wider. Ethereum network will be proof of stake (PoS) consensus, and Bitcoin is still proof of work (PoW) consensus. Bitcoin transactions are still slow, clunky and expensive.

If ETH transactions reach 100,000 tps, ETH could leave BTC standing.

Today Bitcoin is almost $40k.

Whether you buy Bitcoin or Ethereum is your choice. Measure the pros and cons before deciding.

Is now a good time to invest in Ethereum?

You cannot time the markets. Any time is a good time to buy Ethereum if the price rises and you make a profit. Is $3,739 a reasonable price to buy if Ethereum rises to $5k? Yes, clearly. But how about if the price of Ethereum drops back to $1,680? Is it still a good time to buy Ethereum?

Assess your risk tolerance because the price of Ethereum could go either way. What novice investors forget is that crypto prices are transient. They don't stay the same forever.

For example, during the Bitcoin rush of 2017, many people bought Bitcoin at a high price and panicked when the price plummeted. They sold their Bitcoin at a loss. Had they held onto their Bitcoin, they'd have made a significant profit when Bitcoin rose to a new high in May 2021 of $64k

The point is to ride the waves. If you believe in Ethereum as a project and understand the future potential with Ethereum 2.0, buy and hold a portion of ETH for your investment portfolio.