Is Ethereum A Good Investment
ETHs value can fluctuate dramatically in times of market volatility, which is to be expected for a still-evolving digital asset that increased by 50x from under $100 to an all-time high of nearly $5000 between 2020 and 2021.
ETH also still mirrors Bitcoins price behavior quite closely. However, its generally more stable and resistant to price crashes than other altcoins, since it is the longest-standing and most mature layer-1 blockchain in the industry. This can be seen in the market cap share of ETH and other major altcoins.
As you can see, ETH typically siphons a lot of the liquidity from other altcoins over time, even if the number of altcoins is perpetually increasing, which is a testament to Ethereums strong community of users, developers and investors. That being said, smaller-cap altcoins usually rise more during bull runs relative to ETH since they have more room to grow.
As the original smart contract blockchain, Ethereum has garnered incredible network effect over the years and acted as a springboard for many of the worlds biggest crypto projects since 2017.
When developers decide to build dApps, Ethereum is usually the go-to network thanks to its strong decentralization, broad ecosystem of open-source tools, applications, and APIs propagated by some of the greatest minds in the industry through more than half a decade of contributions and collaborations. CoinFlip founder Daniel Polotsky explains this very well in his Ethereum price prediction.
Pick Your Cryptocurrency Investments
With Bitcoin gaining so much popularity worldwide, other programmers and investors began to create their cryptocurrency forms and debut them onto the markets through ICOs or initial coin offerings.
Based on the same blockchain technology that Bitcoin was built on, these Altcoins provided new opportunities for investors to get in on the crypto craze by being able to buy in at much lower prices than what Bitcoin was trading at. Some of those newer cryptocurrencies, like Ethereum, Litecoin, and Ripple, are just as popular as Bitcoin itself.
Believe it or not, Bitcoin, which was the first primary cryptocurrency to be invented, was designed as a way for computers to pay each other for borrowing each others processing power and other resources.
It was a novel idea that was largely ignored by those not heavily involved in technology. Its value, at less than a penny per coin, was almost laughable. The creator, who goes by the pseudonym of Satoshi Nakamoto, is still unknown up until this day.
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Investing In Cryptocurrency For Beginners
Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician . He is also a member of CMT Association.
Cryptocurrencies are a digital form of currency and considered by some to be an exciting investment opportunity. Youve probably heard of Bitcoin, first described in a white paper and launched in 2009 and the currency that kicked off the enthusiasm for crypto.
Cryptocurrencies work using an electronic distributed ledger system called the blockchain. Blockchain technology enables anyone with an internet connection to participate, which is part of why many people look at cryptocurrencies as investments that can grow in value over time.
If you want to invest in cryptocurrency, its essential to understand how cryptocurrencies work, where to buy cryptocurrencies, and how to invest safely. Keep reading to learn more about how to invest in cryptocurrencies and if investing in cryptocurrency makes sense for you.
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How To Invest In Cryptocurrencies
Once you’ve found a cryptocurrency you think will make a good investment, it’s time to start buying.
The first step is to open an account with a cryptocurrency exchange. Most stock brokers don’t support trading in cryptocurrency. Coinbase is one of the most popular and beginner-friendly exchanges in the U.S. Other options include Gemini, and newer brokers such as Robinhood and SoFi support crypto. Just be sure the exchange you want to use also supports the cryptocurrency you want to buy.
Once you’ve funded your account with fiat currency, you can make an order to buy your cryptocurrency. Orders on an exchange work the same way as orders in the stock market. The exchange will match your buy order with someone making a sell order at the same price and make the trade.
Once your trade is complete, the exchange will hold your cryptocurrency for you in a custodial wallet.
Buying cryptocurrency is the easy part. As a crypto investor, you have to be prepared for volatility. Crypto, in general, is more volatile than traditional asset classes such as stocks. Price swings of 10% or more in just a few hours are very common.
Additionally, you should consider how much of your portfolio you ultimately want to allocate to a specific cryptocurrency and to the asset class in general. With the volatility of crypto, be sure to give yourself wide bands of acceptable allocations. If your investments fall out of those bands, be sure to rebalance.
Learn How To Invest In Cryptocurrency What To Consider Before Investing And How You Can Make Money While Investing In Cryptocurrencies
Cryptocurrency has moved into the mainstream as an investment asset class. If you’re looking to add some to your portfolio, it may be difficult to figure out how to get started. Crypto is currently unregulated, and investing in it can feel more Wild West than Wall Street.
Read on to learn the basics of cryptocurrency and how to get started investing in it.
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The Value Depends Largely On Popular Opinion
Investing in crypto-assets is highly speculative. The market value can fluctuate a lot over short periods of time, and is affected by things like media hype and investor opinion.
The price of crypto may depend on:
- its popularity at a given time
- how easy it is to trade or use it
- the perceived value of the currency
- its underlying blockchain technology
How To Buy Cryptocurrency
You may be wondering how to buy cryptocurrency safely. There are typically three steps involved. These are:
Step 1: Choosing a platform
The first step is deciding which platform to use. Generally, you can choose between a traditional broker or dedicated cryptocurrency exchange:
- Traditional brokers. These are online brokers who offer ways to buy and sell cryptocurrency, as well as other financial assets like stocks, bonds, and ETFs. These platforms tend to offer lower trading costs but fewer crypto features.
- Cryptocurrency exchanges. There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.
When comparing different platforms, consider which cryptocurrencies are on offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources.
Step 2: Funding your account
Once you have chosen your platform, the next step is to fund your account so you can begin trading. Most crypto exchanges allow users to purchase crypto using fiat currencies such as the US Dollar, the British Pound, or the Euro using their debit or credit cards although this varies by platform.
Some platforms will also accept ACH transfers and wire transfers. The accepted payment methods and time taken for deposits or withdrawals differ per platform. Equally, the time taken for deposits to clear varies by payment method.
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Cryptocurrencies: How You Could Invest In Them
There are several ways you can get indirect exposure to cryptocurrencies through Schwab. Although you cannot directly buy or sell Bitcoin or any other cryptocurrency at Schwab , Schwab provides several ways to access cryptocurrency markets:
Cryptocurrency coin trusts: Over-the-counter cryptocurrency trusts allow investors to trade shares in trusts holding large pools of a cryptocurrency, although these can involve high volatility, hefty fees, and other risks. Typically, these products are launched as private placements to accredited investors. Once holding period requirements are met, accredited investors may sell their shares in the “over-the-counter” market to all investors, including smaller retail investors. Historically, these products have tended to trade at large premiums or discounts to the value of their underlying assets due to their limited ability to match the demand for shares with the available supply .
Bitcoin futures: Bitcoin futures contracts are agreements to buy or sell a specific quantity of Bitcoin at a specified price on a particular future date. Schwab clients with a futures account can trade Bitcoin futures contracts directly. Traded contracts are settled in cash, not cryptocurrency.
Are There Cryptocurrency Exchange
Given the thousands of cryptocurrencies in existence , its understandable you might want to take a diversified approach to investing in crypto to minimize the risk you lose money.
Multiple companies have proposed crypto ETFs, including Fidelity, but regulatory hurdles have slowed the launch of any consumer products. As of June 2021, there are no ETFs available to average investors on the market.
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More Ways To Invest In Cryptocurrency
Did you know that you can now open a secure crypto account with several exchanges explicitly built for public investors? On top of that, the mainstream nature of the largest cryptocurrency, Bitcoin, has opened the door for more traditional financial institutions to start offering access to their clients.
If your goal is solely to buy and hold Bitcoin, you can now do so with popular apps such as PayPal and CashApp, and it is as easy as tapping your finger a couple of times on your phone screen.
The beauty of Bitcoin going mainstream is that you can easily create a Bitcoin wallet with one of these companies and then transfer that wallet to several other crypto-centric companies if you ever decide to become more involved in actively trading crypto assets.
Perhaps the largest of these brokerages that specialize in facilitating the trading of cryptocurrencies is , which has grown to become one of the biggest exchanges of its kind. With Coinbase, people who may have already been familiar with popular stock and currency trading platforms can access a user-friendly interface that allows them to actively invest in and trade a vast number of cryptocurrencies in an environment that is already pretty familiar to them.
One of the most extraordinary things about cryptocurrencies is that you can trade them 24 hours a day, seven days a week, allowing them to be one of the few asset classes that can respond to events that may occur. At the same time, other markets are closed for business.
Etoro Overall Best Place To Invest In Cryptocurrency
eToro was launched in 2007 and the platform is home to a wide range of asset classes. In addition to cryptocurrencies, this covers everything from ETFs and index funds to forex and commodities. You will have access to 59 cryptocurrencies here all of which can be purchased from a minimum investment of $10.
This is ideal if youre looking to explore crypto assets for the first time and you dont want to risk too much money. Moreover, at a minimum trade size of $10, you can invest in expensive cryptocurrencies like Bitcoin and Ethereum both of which are now worth thousands of dollars per token.
When it comes to fees, eToro allows US clients to deposit USD on a fee-free basis. This is the case irrespective of which deposit type you choose. Options here include ACH, e-wallets like Paypal and Neteller, online banking, and debit/credit cards. Trading commissions when you buy cryptocurrency cost just 1% which is built into the price that you see when you place an order. This way you can buy Bitcoin and other cryptos with a credit card from the comfort of your own home.
If you are interested in gaining exposure to cryptocurrency but you dont know which tokens to add to your portfolio eToro offers a duo of passive trading tools. First, there are professionally managed smart portfolios, which allow you to diversify across more than a dozen digital currencies through a single investment.
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Cryptoassets are a highly volatile unregulated investment product.
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Earn Yield On Your Eth Through Lending
- Pro: Passively grow your investment through lending and earn regular yield payments.
- Cons: Staking returns on ETH are not as lucrative as other tokens, and 32 ETH is required to become a full validator.
Investing is just as much about growing capital you already have, as it is about acquiring new assets. You can earn a yield on any ETH you already own through a number of methods, such as lending, staking and DeFi. The easiest method, which can be done through an exchange, is via lending, also known as crypto savings accounts.
These accounts allow you to deposit your ETH coins in return for an annual percentage yield which is paid out as additional ETH. Returns are generated by lending out your ETH to other users who pay interest on the loan, which is paid out to you as yield. Borrowers must deposit capital in order to take out a loan, which is used to protect your funds in the event of the borrower defaulting on the loan.
Good Reasons To Invest In Cryptocurrency
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Is Cryptocurrency A Good Investment
The cryptocurrency markets are far more volatile than the stock markets. With less liquidity, and more speculation than traditional financial markets, the value of any given cryptocurrency can rise and fall by 30% or more in a day. Not only that, crypto markets are open for trades 24/7, 365 days a year. There are no evenings or weekends off like the NASDAQ or LSE
If youve been hearing about cryptocurrencies a lot these days, you may feel like its a good opportunity to make a quick profit. But if youre just jumping on the bandwagon and take no steps to educate yourself about how the technology and the market work, you risk losing money.
Lets take a look at Bitcoin, for example the first and by far most dominant cryptoasset.
Early investors in Bitcoin have made millions of dollars in profits. In the span of just one year, Bitcoins price went from $7,000 USD in April 2020 to over $60,000 USD in April 2021! Now imagine what kinds of profits went into the pockets of people who bought Bitcoin back in 2013, when it was a mere $100 USD.
Though that sounds very exciting, it certainly is not the whole picture. Take a look at the entire graph, showing Bitcoins fluctuations in price between October 2013 and the end of May 2021. Its not a straight upward climb.
Thats why you should only ever risk as much money as you can afford. Like Wence Casares, CEO of Xapo, sums it up in an AMA on bitcoin.com:
Is There A Less Risky Way Of Investing In Crypto
Stablecoins could be a less risky way of investing in cryptocurrency, according to Gavin Brown, associate professor in financial technology at the University of Liverpool.
Brown points to tether, the largest stablecoin, backed by one dollar per coin. It topped the $50 billion mark on 26 April 2021 but he warns that potential investors shouldnt necessarily see tether as the next big thing.
In theory it wont ever be worth more than a dollar. But its potentially an interesting option for any varied portfolio and it could be a slice of stability if things start to suffer.
The stablecoin has not been without controversy either being fined by the New York Attorney General and banned from the state the year.
You could also buy shares the companies associated with bitcoin.
There are also some funds and investment trusts that have exposure to cryptocurrencies, which is a less risky way of investing than buying the currencies themselves.
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Make Your First Transaction
When your account is funded and youve researched which cryptocurrency you want to buy first, its time to initiate a transaction and buy your first cryptocurrency. This is typically a straightforward process. If youve ever purchased a stock using a major brokerage website or mobile app, you will likely have a familiar experience.
How To Buy Cryptocurrency On A Decentralized Exchange
The question, what type of exchange to use depends on a number of factors. What is your risk tolerance? What are your investment goals and timelines? What is your investment or trading strategy? How important is security, privacy, or decentralization to you?
There are a lot of variables and trade-offs to consider, and no one-size fits all answer. One thing is for certain: crypto investing can be risky so do your own research, and do not make investments without strong conviction.
If you want to learn more about how to safely invest in CeFi and DeFi exchanges, our Crypto Investment School course has a comprehensive curriculum taught by crypto investors whove got real-world experience.
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