How to Invest in Ethereum (Ether)

It’s just two years old, but this open-source blockchain-based platform is already kickin’ out the jams. As of January 2nd, Ether has hit an all-time high of $900 and shows no signs of slowing.

At the same time, the ever-popular Bitcoin posted a record low market cap, suggesting that there is no time like the present to diversify one’s portfolio.

Below, we’ll get into everything you NEED to know before buying this increasingly valuable cryptocurrency. But before we dive into it, let’s define what Ethereum actually is.

When we talk about Ethereum, we’re really talking about the decentralized platform that’s powered by Ether, a digital asset. You don’t technically want to invest in Ethereum so much as the cryptocurrency that is powered by blockchain tech—Ether or ETH, for short.

There are many cryptocurrencies out there, from Litecoin and Zcash to Bitcoin rival Ripple. And while Bitcoin is the godfather of crypto, there are several newer digital assets that are poised to double in value in the year ahead.

Many noted crypto experts have predicted that 2018 will be the Year of Ethereum. And with the value steadily rising, it’s clear to see why.

Due to the blockchain, each unit of Ether can represent anything for a share in company stock to a kilowatt of energy.

Cryptocurrencies like Ether are exciting for this reason—because they can be used as a token for Ethereum-based utilities, such as paying for goods and services or for P2P trading.

Smart contracts are how things get done in Ethereum. Ether is the currency that is used in the Ethereum network to do anything.

This is what makes Ether, and other digital assets, so attractive to an expanding number of financial institutions. Investors can see how cryptocurrencies will simplify their daily lives. With blockchain, we will no longer have to deal with banking transaction fees or other institutional B.S.

In this guide, we’ll give you an exploded view of the following and more:

  • The basics of Ether investing
  • Why Ether is gaining momentum
  • How to buy Ether
  • How to protect & secure your Ether
  • How Ether differs from other digital assets
  • What people are saying about the future of Ether

Note: If you don’t need any further information about Ether and just want to start investing now, Etoro is the best social trading and investment network for buying and trading Ether.


Why You Should Invest in Ethereum (Ether)

As we mentioned earlier, Ether is on the rise and it’s gained significant momentum in a very short period of time. It is one of the fastest growing cryptocurrencies in modern history.

To put that in perspective, we can look back at January of 2016 when ETH was trading at approximately $1 USD. By May—thanks, in large part, to people funneling $150 million worth of Ether into the crowdfunded Decentralized Autonomous Organization (DAO) Project—it was trading at $14.80.

Less than one year later, it was already up to $52.31. That makes Ether the Speedy Gonzalez of digital assets!

With more and more companies and startups adopting Ether as a means to transact, the value will only balloon as time goes on.

As with all cryptocurrencies or, indeed, all investments, purchasing Ether is a gamble and it can be risky…but it can also prove to be a lucrative investment. We can think of Ether in the same way we think of diamonds.

Diamonds are a fool’s investment if the investor is playing with chump change, but they can be a big win for those who have buku bucks to spend. On the other hand, Ether can also be thought of as digital gold for the more frugal investor that’s on a budget.

Since Ether is a denomination that’s broken down into a quintillionth of a token, even the little guy can yield large gains.

Like gold, Ether and other cryptocurrencies can be traded without a capital gains tax being imposed on the investor. While this may change due to the Republican tax reform bill that’s on its way to US President Trump’s desk, for the moment, investors can defer such taxes.

Cryptocurrencies are currently tax-free in Germany, Denmark, Singapore, Belarus and Slovenia.


How to Invest in Ethereum (Ether)–Step By Step

The first thing you’ll need to invest in Ether is a digital wallet. Ethereum is not traded on any major stock platform, it has to be converted in your wallet. One of the easiest ways to get involved in Ethereum is to use eToro to speculate on the price of ETH.

Here is a simple step-by-step guide to using eToro for Ethereum:

Step 1: Go to Etoro.com and click the Sign Up button on the bottom left of the screen.

 

Punch in your basic info (Name, email address and phone number) and hit Confirm.

Straight away, you’ll see the current price of ETH fluctuating at the top of the page and the option to trade. You’ll also see comments from other investors and be able to look at their News Feed.

Step 2: Click on Deposit Funds, then fill out their survey.

Once you’ve entered your personal information, you’ll be automatically redirected to the same screen. Here, you’ll want to click the blue Deposit Funds button in the lower left, at which point you’ll be prompted to fill out a short survey.

The reason for the survey is to establish whether or not you have a fundamental grasp on the risks associated with trading.

The survey is simple enough, but if you have any trouble answering a particular question because you’re unfamiliar with one of the trading terms, just Google it and you’ll be good to go.

For instance, my questionnaire asked the following question:

When I Googled the word, the top search result for the definition of ‘Gapping’ was this: “In general, a trading strategy in which the participant borrows short and lends long. This strategy gives the lender an overall better interest rate as short rates are generally lower than long rates. Also in technical analysis, gapping can refer to the use of a gap strategy which looks at stocks that display price gaps from previous closes.”

For this reason, the correct answer is obviously A.

If you have any trouble filling out the survey, drop us a comment below and we’ll reply with solutions.

Step 3: Fund your account

In this step, you will be taken to the funding screen which looks like this:

Etoro is convenient because they permit users to make deposits with any major credit card. Other platforms are more limited in comparison, placing restrictions on certain payment methods.

Here, you want to add your desired investment amount, fill in all required info and click the Submit button at the bottom of your screen.

You’ll see that eToro are adamant that your funds will be kept securely in a reputable bank and that they are committed to your safety and privacy. This is what you should always look for out of a cryptocurrency exchange.

Note: the minimum investment is $200 USD.

Step 4: Start trading

Now that you’ve successfully funded your account, go to the Ether trading portal here: https://www.etoro.com/markets/ethereum

If you ever forget the URL, you can return to the page by clicking ‘TradeMarkets’ in the menu on the left of your screen, then select ‘Crypto,’ followed by ‘ETH/Ethereum.’

Now, you’ll just enter your trade parameters and click ‘Open Trade.’

Note: I am not a financial advisor by trade nor am I a broker, so I cannot advocate a particular trading strategy. Etoro has lots of useful, informative guides that can help you get started. This includes guides to executing trades. You can find them all at their Learning Academy. It’s a must-read for beginners.

For first-timers, much of the terminology can be a bit perplexing, but once you’ve made your initial trade, it all becomes more familiar. I started investing as a total novice and, in a short amount of time, I had picked up the lingo lickety split. Now, I’m comfortable using this platform and others like it.

Step 5: Copy others’ trading strategies

Attempting to make money trading Ether and other cryptocurrencies can be a hair-pulling experience for some. One way to save yourself a lot of headaches is to watch other traders carefully. Study their trading strategies and apply them yourself to see the results.

Etoro makes this easy to do since it’s a social platform. Click the ‘Copy People’ option in the menu on the left of your screen and you’ll see a list of other traders, their investments and their returns.

Important note: make sure you select ‘Crypto’ in the Markets dropdown and look at traders in the last six months. In crypto, six months is a relative lifetime, so you’re on the lookout for people with proven track records of positive outcomes/returns.

There are many features and benefits to trading with eToro. For one, you don’t have to have equity in Ether tokens. On the contrary, you can trade CFD (Contract for difference). Since you’re not in possession of tangible digital assets, you are capable of trading Ether via fiat currency like USD or Euro.

At eToro, they have a dedicated staff of regulated brokers who are there to help you at any time. Where many exchanges are completely unregulated, eToro is committed to rock solid encryption to ward off potential hackers. They appreciate their clients’ need for “cold storage” (read on for more information about cold data storage).


Ethereum (Ether) Exchanges

Finding exchanges that allow you to buy ether without bitcoin can be a bit of a daunting prospect, but there are a select few that are still around. Here is our list of the very best ether exchanges on the market.

  • Coinbase
  • Kraken
  • BitPanda
  • Bittylicious

One of the biggest crypto exchanges in the world, Coinbase has earned a name for excellence among Bitcoin investors and financial experts alike.

Coinbase is a San Francisco-based company that rose to prominence in 2012. They have positioned themselves as one of the leading cryptocurrency exchanges by virtue of their unique multi-signature or “Multi-Sig” vault which enables users to self-manage the security of their digital wallet keys.

This innovative tool ensures that investors will have access to their altcoins even if Coinbase were to go out of business or restructure.

Of particular interest to people who want to invest in Ethereum is the fact that Coinbase have had a relationship with Ethereum creator Vitalik Buterin, having offered him a job in 2013, well before he developed the platform.

As such, they have a very thorough understanding of Ethereum and its applications, to say nothing of its potential growth.

Their service is fast and user-friendly, and all deposits are fully insured. However, it is important for prospective investors to keep in mind that their insurance policy does not cover lost or stolen passwords.

Advanced features include Shift Card which allows users to pay for purchases with their Coinbase balance. This process converts your altcoins into US dollars.

While Coinbase is one of the biggest names on the market, they lack a strong social media presence when it comes to sites like Reddit where users regularly complain about their accounts being frozen or flagged. This could be easily remedied if Coinbase spent some time on pages like r/Coinbase or r/bitcoin.

Kraken is pretty much second only to Coinbase when it comes to the best cryptocurrency exchange. They are a trusted source for buying and trading bitcoin and ether and they’re known for being secure and transparent.

Unfortunately, there are some areas where they leave something to be desired. Where Coinbase offers multiple deposit and withdrawal options, Kraken only allows bank transfers (no PayPal, credit cards or debit cards).

The area in which Kraken excels is the sheer volume of available cryptocurrencies. With Coinbase, you can only get your hands on three digital assets (Bitcoin, Ethereum and Litecoin, respectively), but Kraken offers 16+ cryptocurrencies.

On the other hand, Coinbase is more beginner-friendly than Kraken, providing strong support from dedicated brokers, and an ergonomic mobile app. Kraken is lacking in these areas as well.

The key difference between the two is the process by which you trade ether, bitcoin, etc. Kraken users trade currency pairs in much the way people trade on the stock exchange. This leaves plenty of room for mistakes, especially among novice traders.

For those looking to trade with fiat currency, the process can be quite sluggish. Luckily, their customer service staff are fairly reliable and can usually resolve any discrepancies or grievances in a timely manner.

On the plus side, Kraken has lower fees than Coinbase, but this is likely due to the fact that Coinbase offers more versatile services and must process credit and debit cards through a high risk merchant processor.

Both Coinbase and Kraken are compliant with industry best practices when it comes to storing and securing funds. 2-Factor Authentication is available from both sites.

BitPanda, formerly known as Coinimal, is one of the greatest Ether sources in terms of payment options. They accept Amazon, Giropay, Neteller, Sofort, SEPA, Skrill or major credit cards.

Featuring a sexy, intuitive user interface and rock solid customer support, BitPanda has cemented their reputation as one of the top exchanges around. They gained in momentum after winning a startup award in 2016 and they haven’t slowed since.

With thousands of customers who swear by their lightning fast service (you can purchase your coins in under two minutes), BitPanda has quickly distinguished themselves from their competitors.

Bittylicious is a UK-based trading project that supports 11 digital assets. The projects matches sellers with buyers. Kind of like a dating service for crypto traders.

They have an average 5-star rating on Trust Pilot where users rave about the excellent experiences they have had buying from the exchange. One user called Bittylicious the “perfect trading platform” while another said they are “simply superb.”

All transactions are completely guaranteed and users are promised a full refund if their payment arrives late.


The Most Popular Ethereum (Ether) Investing Strategies

There are many strategies for allocating Ether within your portfolio. Selecting the right one really depends on what your portfolio looks like.

To get the most out of your investing experience, it’s advisable to avoid the traditional investment paradigm and, instead, opt for a long-term approach.

Perhaps you’ve heard the term “hodling” and wondering what it meant. Hodling is crypto slang for holding. The term was accidentally coined by a member of a Bitcoin forum who drunkenly misspelled “holding” in a late night discussion about Bitcoin.

Holding refers to purchasing a cryptocurrency and holding onto it in hopes that it will appreciate in the long run. This approach is ideal for those who are patient and don’t get easily discouraged by temporary periods of depreciation.

Before we get into the best strategies, a word of warning: Investing in cryptocurrencies can be a risky move. Users should be aware of potential loss. Not only is the market volatile, but human error remains a factor as does kinks in digital technology.

In November of 2017, $300 million in ether were lost forever after a user accidentally took control of hundreds of wallets and mistakenly destroyed them while attempting to return them to their rightful owners.

This unfortunate event was the consequence of a series of bugs in the wallet service which illustrates just how vulnerable these supposedly secure platforms can still be.

With that being said, tens of thousands of people buy and sell altcoins every day and there is plenty of money to be made at cryptocurrency exchanges. Just beware…you can lose it as fast as you make it.


Dollar-cost Averaging

Investors all too often rely on breaking news, stat reports and industry prognosticators to determine when we should sink money into our portfolio, but there’s no sure-fire method for investing. Buying low and selling high isn’t always the way to go.

A far simpler approach is to use a DCA (Dollar-cost averaging) tactic. That’s where you make frequent fixed investments to slowly procure wealth in the long term.

Anyone with a background in digital assets knows how volatile they are. Prices rise and fall without warning. Periods of substantial depreciation are bound to occur at one point or another. But rapid appreciation can also be anticipated.

As we mentioned earlier, patience is the name of the game. If you can hold out and rough it out through the lumps, you may just amass some serious riches with ether.

If you commit to spending $100 per week on ether and the currency’s value drops, your hundred bucks will just afford you more tokens. And when the price rises, your investment will buy you less ether. This is how you average out the cost over the long haul. Hence, dollar-cost averaging.

This approach is great because it prevents against losses and keeps you flush when the market’s in a slump. By implementing this strategy, you won’t have to be glued to your computer screen day and night, pulling your hair out as you watch the market like a hawk.

Instead, you’ll be able to check your currency at your own leisure without fear of losing large sums of money to your investment.


Fractional Investments vs. Concentrated Investments

If you make in excess of $100,000 annually and you want to turn that into $500k, you might have some luck investing in ether.

Why?

Because its value is on the rise and many people are turning to it as an alternative to investing in Bitcoin.

One thing to consider when buying ether is the denominations. You don’t have to buy an entire ether token. You can actually make microtransactions.

Ether breaks down into a quintillion Wei. Think of a Wei like you think of the penny, it’s the tiniest piece of a dollar. Except the difference between a penny and a wei is that there are more wei per ether than there are pennies per dollar.

You can also invest in a Finney (a thousandth of an ether), a Szabo (a millionth of an ether) or a Shannon (a billionth of an ether).

Fractional investments are sound because they allow for the growth curve that any given currency will undergo over time. Large, concentrated investments by comparison pose a monetary threat to those who can’t afford to take a tremendous loss.

The shrewdest allocation distribution strategy is to balance your portfolio to encompass a number of altcoins. One move you can make is investing in ICOs (Initial Coin Offerings).

Since you can invest in ICOs with ether tokens, you’ll further diversify your assets and speculate on lucrative futures.

By creating a variety of currencies, your portfolio can be instrumental in three alternate strategies—as a hedge in a speculative portfolio, as an insurance policy of sorts and as a calculated bet for early retirement.


Safely Storing Your Ether: The Best Ethereum Wallets

That are a number of factors to consider when choosing an Ethereum wallet. You want a wallet where you control your private keys. Security and privacy are always top priorities where digital assets are concerned.

Here are some other things to consider when selecting a wallet:

  • User-friendly interface
  • Backup and restore features
  • Multi-device compatibility

If a wallet doesn’t meet these demands then it’s not a wallet worth buying since it will likely put your assets at risk of being lost or stolen. Here is a short list of the top Ethereum wallets. Each of them is safe and secure and all of them carry a solid rating among consumers.

  • Trezor
  • MyEtherWallet
  • Ledger Nano S
  • Jaxx Mobile Wallet
  • Coinbase Web Wallet

Trezor’s hardware wallet is one of the absolute best security solutions for your digital assets. Even though lots of cryptocurrency users depend on open-source web and mobile wallets, hardware wallets have grown in popularity due to a rash of security scares that created a demand for more secure alternatives.

Trezor’s “Vault” wallet is basically a USB dongle that adds another layer of authentication to outbound crypto transactions. Invulnerable to keyloggers or other forms of attack, the Trezor wallet has got you covered even if your PC is compromised because the hacker cannot access your private key.

MyEtherWallet is a free, open-source, client-side interface that generates Ethereum wallets. There are no third-party servers, and you can write and access smart contracts. It features a built-in BTC (Bitcoin) to ETH (Ether) swap facility.

With MyEtherWallet, there’s no registration and you won’t have to share any personal information with the site. Free, easy and anonymous. It doesn’t get much better than that.

If you own any digital assets then you’ve doubtlessly heard about Ledger Nano S. It’s gotten excellent reviews from consumers and is renowned for its easy setup.

Unlike Ledger’s other wallets, the Nano S has a screen that enables you to use it even on a malware-infected computer. You get a micro-USB cable, a lanyard for wearing the device on your person, a keychain so you can take it with you when traveling by automobile and a recovery sheet for writing down seed.

It’s one of the most affordable solutions on the market at just $65 USD and it offers extra security courtesy of the two buttons that must be simultaneously pressed in order to confirm a payment.

Since you have to create a unique PIN code when you set it up, no one will gain purchase to your Nano S and everything will be stored securely offline. If that isn’t reassuring enough, your unit ships with tamper-proof tape, and you have to create a recovery phrase.

Fortunately for the forgetful among us, the unit comes with a sheet for writing down your recovery phrase.

If you intend to manage your cryptocurrencies on an iPhone or similar device, the Jaxx Mobile Wallet is a good choice for storage. Created by Decentral, one of the largest companies in the digital currency ecosystem, the Jaxx wallet offers all of the security features one would expect out of an Ether wallet.

Unfortunately, where this one fails is in launch time. Users have lamented the lag that occurs with it taking up to 15-20 seconds for the wallet to load up on mobile devices. Aside from that minor inconvenience, this one’s got everything you could want—an easy-to-use interface, private key security and awesome customer service.

If you’re intending on using Coinbase, you can always take advantage of their web wallets. It’s cheap and easy to transfer your ETH and store them to their public address. The only drawback here is that your private keys are not in your control.


What Makes Ethereum Different from Other Cryptocurrencies?

All major cryptocurrencies differ from one another in specific ways, that’s the reason they have staying power and are able to compete for prominence. For instance, Dash is making a splash in the POS (point-of-sale) industry due to strategic partnerships, and they’re popular with investors because they offer incentives for users to maintain a wallet balance.

Ripple is taking the banking world by storm and is appealing to investors because it’s all about transactional utility instead of speculation.

Ethereum’s ecosystem differs from the other major cryptocurrencies in that it focuses on the technical side of blockchain tech from smart contracts to decentralized applications. Ethereum also distinguishes itself from other cryptocurrencies because it’s more than a digital asset, it’s a ledger technology that companies can use to develop new programs.

Unlike competitors in the space, Ethereum has been embraced by a super-group of Fortune 500 companies that formed the Enterprise Ethereum Alliance to work in concert on learning and building on Ethereum’s technology.

Ethereum tech is poised to change the “Internet of Things.” It could have the potential to connect a smart device to an oil pipeline and allow the smart contract to adjust oil flow based on historical and current data, and global demand.

This is just one example of the many blockchain use cases that are out there, all of which may benefit from Ethereum’s unique technology. Executing smart contracts will inevitably lead to the evolution of everything from insurance and administration to retail and the public sector.


Ethereum vs. Bitcoin

Ethereum and Bitcoin couldn’t be more disparate. This is not to say that one is “better” than the other, but they are most certainly different. For starters, more than two-thirds of all available bitcoin have already been mined whereas approximately half of Ethereum’s tokens will have been mined by its fifth year in existence.

Ethereum is the biggest decentralized software platform for enabling smart contracts and “Dapps” (Distributed applications) to be built and run without downtime, third party interference or fraud.

Bitcoin serves as an alternative to regular money and as a means of payment transaction. Ethereum is specifically designed to be a platform for P2P (peer-to-peer) contracts and applications via the ether currency.

Some have even speculated that Ethereum will overtake Bitcoin in the due time. But one thing to keep in mind is that Ethereum isn’t intentionally in competition with Bitcoin, rather it is an advancement of the blockchain that Bitcoin relies upon.

We’ve referenced cryptocurrencies and tokens throughout this page and even though the terms are relatively interchangeable, it’s important to note that Ethereum isn’t strictly a cryptocurrency as Bitcoin is. Ethereum is a token.

Tokens differ from traditional cryptocurrencies because it can write smart contracts which cannot be altered once they are created. For example, if I vote for the President using a smart contract, no one can tamper with my vote or attempt to vote as me.

You can use a smart contract to sign a car over to another person. Once your digital signature is recorded, the car is mine and cannot be transferred back to the original owner. Proof of any transaction can never be altered or removed/deleted.

Whereas no more bitcoin can be made, Ethereum is inflationary and, therefore, more tokens can be created in the future.


Ethereum (Ether) Predictions for 2018 & Beyond

Forecasters are expecting Ethereum to reach a maximum price of $2,108 by the end of 2018 with the price steadily going up throughout the first and second quarter of the year.

Some experts expect IBM and ConsenSys to team up to unify the best of the permissioned Fabric blockchain with that of the permissionless Ethereum.

Ethereum’s own co-founder predicts big changes on the horizon, promising that Ethereum 2.0 will improve privacy, consensus safety, smart contract safety and scalability on the platform.

Where scalability is concerned, co-founded Vitalik Buterin believes “sharding” is the answer. Sharding splits up the vast number of transactions on blockchain among multiple networked machines, dividing them into “shards” or smaller sections.

The underlying mathematics and mutual communication could streamline the process of validation and allow for aggressive experimentation. Buterin has proposed additional upgrades as well, including a proof of concept in Python and stateless clients for faster syncs.


What are Altcoins?

If you’ve stuck with us so far, you probably already know a great deal about cryptocurrencies. But if you found this page because you were looking to learn more about these digital assets, you’ve come to the right place.

“Altcoin” refers to any digital asset that is an alternative to Bitcoin. The vast majority of popular altcoins utilize the same basic building blocks as Bitcoin. They earned the nickname “altcoins” because most of them aim to replace or improve upon one or more Bitcoin components.

There are a wealth of contenders gunning for Bitcoin’s position in the space, Ethereum being chief among them. Other examples include Ripple, Litecoin, Dash, NEM, Zcash, Decred, PIVX.

However, despite these being some of the most well-known names on the cryptocurrency market, there are others that are being bandied about as sound investments for the year ahead. There is much chatter on Bitcoin-related forums about Xspec, Oyster Pearl, Elixir, Substratum and UNIFY with forum members insisting that they are set to boom.

There are more than 1,250 altcoins at the time of this writing. Many of these altcoins will no doubt see a “bearish” or downward trend, for the layperson. But all of them are set to make an impact on the space, and some will likely see a bullish (upward trend) soon as a result of Ethereum’s recent rise.

Circulation supply (the number of coins circulating) will play an instrumental role in their value. So, too, will the options and fees charged by individual exchanges.

Altcoins serve as better cryptocurrency laboratories than Bitcoin’s testnet. At the same time, they aid in Bitcoin’s ongoing evolution since their mere existence and innovation keeps Bitcoin’s developers on their toes. After all, if the creators of an altcoins make strides in the space, and the community calls for such improvements to be made to Bitcoin itself, the developers can copy those features.

The top altcoins of the year (thus far) are Ethereum, Litecoin, Ripple, IOTA, Cardano, EOS, Monero, NEO, Stellar, Lisk, TRON, ARDOR, ICON, BitShares, Railblocks, Waves, Stratis, Steemit, Golem, Kyber, Powerledger, Civic and AdEx.

Litecoin has been called the silver to Bitcoin’s gold. In fact, it’s a fork of Bitcoin. It took a steady rise in the final quarter of 2017 and it has a reputation as the fourth largest cryptocurrency.

Ripple is equally prominent in the space, serving as a digital payment network that’s been adopted by the bank of Tokyo. Other banks are expected to follow suit. Ripple’s cryptocurrency is XRP, an altcoin that is likely to boom thanks to the speed at which it is paid out (XRP payments are delivered in four seconds flat!).

IOTA is expected to become the standardized currency of the Internet of Things. It is an open-source digital ledger for securing communications and payments between machines on the Internet of Things. The minds behind IOTA are looking to eliminate the need for blocks and allow for superior scaling.

Instead of miners verifying transactions as we’ve seen with Bitcoin, IOTA enables the transaction creator to do their own computational work to approve transactions. Since there are no transaction fees, nanopayments (miniscule transactions) can be made with ease.

IOTA gives companies the ability to experiment with business-to-business models, making this one of the most exciting altcoins to emerge.

As the space expands, we are bound to see the arrival of more altcoins and blockchain startups. Now is the time to get in on the ground floor of these emerging and growing currencies.