HomeEthereumInvest in Ethereum
Ethereum logo

How to Invest In Ethereum In 2021

Ethereum logo
Ethereum (ETH)
...
24H Change
...
7 DAYS CHANGE
...
Market Cap
...

Ethereum is a name that is known to anyone interested in cryptocurrency, as it has firmly established itself as the second most valuable token available. The rapid rise of Ethereum has meant that it is the only serious rival to the market-leading Bitcoin in terms of market capitalisation.

Ethereum is a decentralised, open-source blockchain with smart contract functionality, which has made improvements on some of the functionality associated with its forerunner Bitcoin. It is the most actively used blockchain for this reason, and while it may not be as much of a household name as Bitcoin, it has unquestionably become hugely successful.

Launched back in 2015, the Ethereum network was first proposed in 2013 by programmer Vitalik Buterin. The current project is actually a hard fork, with Ethereum Classic continuing in parallel. Ethereum 2.0 is set to revolutionise cryptocurrency even further, by updating the blockchain technology to proof-of-stake and adding improved features. This guide will discuss different strategies on how to invest in Ethereum in detail. 

4 Ways to Invest in Ethereum

There are a variety of ways to invest in Ethereum, and all methods can be used with or without leverage.  Here are four of the most prominent ways to purchase the token.

1. Buy Ethereum Through an Exchange

The first way that you can purchase Ethereum is through an exchange. Cryptocurrency exchanges are widely available online, and are probably the most popular way to purchase digital assets in general.

While digital exchanges typically feature their own storage facilities, it is always advisable to purchase a hardware wallet when dealing with cryptocurrency. There are many of these available, and the following are examples of hardware wives that are compatible with Ethereum.

You can also use a software wallet since hardware wallets are expensive. For regular trading, a software wallet that is always connected is a better option but for long term storage of assets, a cold hardware wallet is generally the best option. 

To purchase Ethereum via a cryptocurrency exchange, it is first necessary to register with the exchange of your choosing. The registration process requires you to register by meeting the terms and conditions associated with that particular platform.

Generally, this will include confirming your identity, via procedures that are referred to as Know Your Customer (KYC). This involves providing suitable documentation, which usually includes government-issued identification documents, as well as proof of address.

While cryptocurrencies continue to retain the privacy of the individual, increased regulation of the space has meant that exchanges are far more professional than perhaps was the case when cryptocurrencies were first launched.

Our recommended exchange

While there are a wide variety of Ethereum exchanges available, we would recommend taking the following advice into consideration when choosing a suitable platform for your cryptocurrency trading.

1
Min. Deposit
$50
Exclusive promotion
Our score
10
Accepts customers from the USA
Offers 15 crypto coins to buy&sell including BTC, LTC, ETC, NEO and more
Trade on the world's leading social trading and investing platform
Start Trading
Payment Methods:
Wire Transfer, Bank Transfer
Full Regulations:
CySEC, FCA

2. Buy Fractions of Ethereum Through an Exchange

It is not necessary to purchase an entire coin or token via exchanges, with fractional purchases also possible. This doesn't apply to every cryptocurrency, but Ethereum is one of those where fractional purchases can indeed be made.

Most exchanges will allow purchases in the region of 0.01 Ethereum tokens, which currently amounts to approximately $20. 

3. Trade Ethereum Through a Broker

Another option for those intending to invest in Ethereum is to trade ETH via a broker. Most brokers will be available online as a digital service, and it is important to understand that the process associated with the broker is significantly different to that of an exchange.

Digital currency brokers act as intermediaries between investors and the market, offering both services and expertise. Brokers should be particularly informed when it comes to the cryptocurrency market, and able to dispense both this wisdom and understanding to users, while also making trades on their behalf.

Online brokers are therefore extremely popular, and are particularly well suited to those investing in cryptocurrency for the first time. While brokerages used to be relatively rare, and were used by regular market participants, this no longer applies today. Brokers are widely available online, and are an excellent option for beginners.

It is also important to note that choosing a broker diligently is particularly important. When conducting this process, you should ensure that the credentials of your broker indicate a higher level of competence, while sophisticated security systems also need to be in operation. You should also ensure that you can access your crypto broker platform 24/7 via desktop and mobile apps. 

Our recommended broker

Although there are a huge amount of brokers available online, we would recommend reviewing the following information before making a decision.

1
Min. Deposit
$50
Exclusive promotion
Our score
10
Accepts customers from the USA
Offers 15 crypto coins to buy&sell including BTC, LTC, ETC, NEO and more
Trade on the world's leading social trading and investing platform
Start Trading
Description:
eToro offers a wide range of cryptos, such as Bitcoin, XRP and others, alongside crypto/fiat and crypto/crypto pairs. eToro users can connect with, learn from, and copy or get copied by other users.
Payment Methods
Wire Transfer, Bank Transfer
Full regulations list:
CySEC, FCA

4. Invest in an Ethereum ETF

Another option for those trading Ethereum is to opt for an ETF (Exchange Traded Fund). These can be used to trade cryptocurrencies through the traditional market, and also feature the particularly useful function of collecting several tokens together into a singular tradable asset.

ETFs track these baskets of assets, and enable open trading on the stock exchange. They are subject to fluctuations in price during the day, as investors buy and sell. Blockchain ETFs tend to be extremely popular, and are an excellent option to trade Ethereum as well.

5 Ethereum Investment Strategies

There are a variety of ways to invest in Ethereum, but in the following section, we will assess five of the most popular strategies.

1. Buy and ‘Hold’ 

What is it?

Buying and holding is a method of cryptocurrency investment that has been popularised in the stock market for many decades. Buying and holding is possible with stock, equities, commodities, and now cryptocurrencies as well, and it involves purchasing a particular asset, and then holding it over a period of time.

Those investors engaging in a buy and hold strategy essentially believe that the market offers excellent fundamentals. It is a clear sign that an investor believes that a commodity or asset will increase in value over a significant period. Buying Ethereum and holding is therefore a long-term strategy, which significantly differs in nature from several other strategies that are available.

What is the benefit of using this strategy?

The major advantage of buying and holding Ethereum is that it is an extremely low maintenance approach. Once you have made the initial purchase, there is no need to follow the stock market closely when engaging in a buy and hold strategy, or indeed to make market movements by buying and purchasing further tokens.

Another advantage of buying and holding is that it can deliver a profit over a significant time period. Effectively, buying and holding can be seen as the equivalent of keeping money in the bank, except that it also promises much greater returns. Conversely, it should also be noted that you can lose money, and it doesn't offer guarantees of bank interest.

2. Day Trading

What is it?

Day trading is another strategy that can be applied to Ethereum, which operates on a much shorter timeframe than buying and holding. Day traders get in and out of the market quickly, often numerous times in a single 24-hour period.

Traditionally, day trading has been most prolific in the foreign exchange and stock markets. Day traders are typically well-educated and well-funded, while they also tend to be highly leveraged, basing their strategies on a short-term return.

Day trading requires investors to be highly attuned to factors that cause the market to move in the short term. This could include a variety of news items, statistics related to the wider economy, profit and loss earnings, interest rates, and other morsels of useful information.

Among the strategies associated with day trading are scalping, high-frequency trading, and range trading. Each of these involves strategies intended to tip the balance of the market in favour of the investor.

What is the benefit of using this strategy?

The most obvious benefit of day trading is that it can return a significant profit in a mere 24-hour period. Day trading can be considered the most engaging and exciting form of trading currencies, with investors required to actively monitor every movement of the market, and make snap decisions based on ongoing data.

Day trading also tends to provide better leverage than holding positions overnight, and it enables investors to take advantage of sudden moves in the market. Conversely, it should be noted that day trading involves more risk than other methods of trading cryptocurrencies, and that it should therefore only be conducted by those with significant experience in the niche.

3. Shorting

What is it?

Shorting is also often referred to as short selling. It is an intriguing way to invest in the cryptocurrency market, but it effectively represents a debt that a particular asset will decline in value over a period of time. Those shorting, short selling, or just selling a particular asset believe that it will depreciate. If they are correct, then they will make a profit, but if they are incorrect, they will lose some of that investment.

Cryptocurrencies enable shorting, in common with many other stock market equities and commodities. These have tended to attract those who are sceptical about the long-term potential of cryptocurrency as a sector.

What is the benefit of using this strategy?

The major benefit of shorting Ethereum is that it enables you to make a profit even in a bear market. This certainly doesn't apply to any buying and holding strategy, which effectively aims to achieve the complete opposite. If shorting is to be successful, there must be unfavourable market conditions for Ethereum.

It is also notable that short selling can be used as part of an overall hedging strategy. We will discuss hedging in more detail later in this document. 

4. Using a Trading Bot for trading

What is it?

Another option for Ethereum traders is to use so-called trading bots. These algorithmic traders are attached to auto-trading software, and enable people to participate in it, so that they can benefit from the cryptocurrency market without, effectively, doing anything.

A successful trading bot will be based on sophisticated artificial intelligence and machine learning techniques. These make it possible for computers to assess the market, and draw conclusions based on data collection and analytical ability.

All that is required for a trading bot is for the human user to set their particular parameters, and then they are programmed to participate in the market on an ongoing basis. This opens up daily trading for a wealth of people to whom it would otherwise have been impossible.

What is the benefit of using this strategy?

There are clear advantages of using algorithmic traders over other systems, including the fact that it requires very little input from a human investor. Another advantage of algorithmic traders is that they democratise the marketplace, offering access to people whose lack of knowledge would otherwise make this impossible.

Trading bots also remove all emotion from the trading process, which is not something that applies to human investors. These robotic traders can also participate in the market for extremely long hours, far in excess of anything that is possible for humans.

5. Hedging Ethereum

What is it?

Another common strategy associated with Ethereum is that of hedging. This is a technique, widely used by successful and institutional investors, whereby trades are used to provide protection against an existing market position. When hedging, investors protect themselves against undesirable outcomes in the market, effectively gaining access to a form of insurance.

While Ethereum itself may be used as a form of hedge, it is more likely that investors would choose to engage in another investment to hedge against a decline in the price of Ethereum.

What is the benefit of using this strategy?

The benefit of hedging is that it is a safety-first approach. It ensures that investors are protected against any outcomes that may be undesirable. Hedging definitely merits consideration for any investor, particularly those intending to invest a significant amount of capital. This is especially true with Ethereum investing, as the cryptocurrency market is notoriously volatile.

Buy Ethereum Today!

What to Consider Before Investing in Ethereum

There are a variety of issues to consider before investing in Ethereum, so in this section of this article, we will go over some of these concepts.

Fees

Gas fees are paid in Ethereum's native currency, ether (ETH). Gas prices are denoted in Gwei, which itself is a denomination of ETH—each Gwei is equal to 0.000000001 ETH. As you can probably imagine, this is an extremely negligible amount of money! Exchanges will also charge fees in relation to Ethereum transactions, but these are usually roughly around 0.1%. Fees are definitely not a barrier to entry with Ethereum.

Risks

There are several risks associated with investing in cryptocurrencies. And the first of these is that the market is relatively volatile compared to some other asset classes. This can be an advantage, leading to big profits from relatively small investments, but it can also, naturally, result in the opposite as well.

Another issue with cryptocurrencies is that they remain relatively unregulated. Both governments and central banks have been involved in crypto regulation in recent years, and the situation has certainly improved. But they are not as regulated as other aspects of the financial system, with debates continuing regarding whether they should be regarded as commodities or virtual currencies.

Cryptocurrencies can also be vulnerable to theft and hacking, while hard forks and discontinuation can also cause problems for cryptocurrency investors. CFD contracts associated with cryptocurrencies are also highly speculative, and can result in both massive gains, but also huge losses when not used diligently.

Payment methods

There are several payment methods associated with Ethereum. Considering the popularity of cryptocurrency, most fiat currencies are supported, as are such payment methods as PayPal, Neteller and Skrill. Bitcoin can also be exchanged for Ethereum.

Why Invest in Ethereum?

There are several viable reasons to invest in Ethereum. Firstly, the cryptocurrency niche is growing, and is expected to expand still further in the future. Considering that Ethereum is one of the most established tokens, this makes it a good investment option as per veteran investors and traders.

Ethereum has also expanded on the functionality delivered by Bitcoin, meaning that it is poised to match, or even exceed, this pioneering cryptocurrency.

The market position of Ethereum also seems to be extremely strong. Ethereum has escalated in value during 2021, reaching an impressive price of over $2,000. Ethereum has outperformed virtually every cryptocurrency during this period, which is obviously encouraging for investors.

Summary of Investing in Ethereum

Ethereum has been one of the major success stories of cryptocurrency, thanks to its technological improvements that have led to a faster blockchain than the market-leading Bitcoin. This means that institutional money has flowed into Ethereum, making it popular among the investment community.

There are many different ways to take advantage of the potential of Ethereum, with several trading strategies available. And there is no barrier to entry for beginners either, with algorithmic traders ensuring that entry to the cryptocurrency market, and Ethereum investing in particular, is possible for anyone.

The investment risk can be suitably managed by using some investment strategies such as hedging. Other strategies like day trading aim to take advantage of the price movement during the day time. 

We use cookies to personalise content & ads, provide social media features and offer you a better experience. By continuing to browse the site or clicking "OK, Thanks" you are consenting to the use of cookies on this website.