Etherum Trading for Beginners
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Ethereum Trading for Beginners
Ethereum is one of the best options available for trading across cryptocurrency exchanges.
If you are addressing Ethereum trading for beginners, this is the right article for you to get moving. However, the journey can be even more pleasant if you watch out for the pitfalls mentioned below.
Most people call all cryptocurrencies Bitcoin due to a lack of awareness. However, for many, besides Bitcoin, Ethereum is as popular as Bitcoin.
Ethereum is as popular as Bitcoin in the cryptocurrency communities. Ethereum not only fulfills its role as a cryptocurrency but also has other factors that benefit a trader while transacting funds in a borderless environment.
The Invention of Ethereum
Vitalik Buterin, an innovative young lad, changed the internet completely through his ambition of inventing a crypto platform that formed the base on which developers could build decentralized applications.
Vitalik suggested a language for application development after thoroughly understanding Bitcoin. Nevertheless, he proceeded with his work on this powerful new project even when nobody showed interest in his suggestion.
Vitalik published a white paper in 2013 describing this dynamic new platform he named Ethereum. In 2014, for his incredible innovation, he was named a Thiel Fellow and received a reward of $100,000.
Vitalik dropped out of the University of Waterloo to make Ethereum a reality. The project quickly picked up pace with the help of other developers and co-founders.
They managed to raise more than $18 million by selling Ether in July 2014, the Ethereum tokens serving as project shares.
Ether serves as computational services and transactional payment on the network of Ethereum.
A year later, on July 30, 2015, they launched their first release, Frontier. Thus a new platform was available to the developers on which they could create their smart contracts and decentralized apps.
Ether is the second largest cryptocurrency globally, with a market capitalization of roughly $138 billions at the time of writing this article.
Since Ethereum is a cryptocurrency, it is pretty volatile and started to surge gradually in the second quarter of 2017. The general public now views cryptocurrency as a cool thing to invest in.
As the general public started to adopt cryptocurrencies, market capitalization also improved. The reliability of the cryptocurrency was never more evident than during the time the pandemic plagued the globe. Where the traditional markets failed, the crypto market flourished and reached an all-time high in November 2021, reaching roughly $4,800. Thus showing the tremendous potential of cryptocurrency.
How to Trade Ethereum
Before even thinking of Ethereum trading for beginners, you must approach a secure and reliable service of a competent brokerage. Therefore, it would be in your best interest if you were to approach a reliable, secure, and well-established forex broker like Blockchain Tradein.
Blockchain Tradein offers you the choice of either buying Ethereum tokens or trading in Ethereum CFDs, or both.
You even have the option of trading them with a fiat currency like ETH/USD (Ether/US dollar), ETH/BTC (Ethereum/Bitcoin), ETH/EUR (Ethereum/Euro), ETH/CAD (Ethereum/Canadian dollar), and ETH/GBP (Ethereum/British pound).
It is advised that traders use caution before using leverages since Ethereum is volatile, and any miscalculation can result in heavy loss. Since Ethereum has shown massive growth in price in the past, ‘buy and hold’ is one of the most favored strategies. Traders would miss out on several great opportunities if they stick only to ‘buying dips.’
Ethereum Trading Basics
Since Ethereum is a relatively new cryptocurrency, there is a price swing primarily due to the events regarding its development.
As mentioned in the article, The Ethereum network uses Ethereum as a trade token to pay for transactions and computational services. Thus the expansion of the Ethereum blockchain and related services are bound to affect the value and the price of Ethereum.
Another factor that influences the price of Ethereum is the reigning king of cryptocurrency, Bitcoin. As and when the money flows into Bitcoin, the price of Ethereum and other cryptocurrencies also increases. The contribution of Bitcoin price fluctuation affects the inherent volatility of Ethereum. Thus, when the price of Bitcoin takes a toll, the entire cryptocurrency slides down.
Bitcoin price influences the entire price of the cryptocurrencies since they share the same market. Another reason is that currently, Bitcoin has a market capitalization of roughly $430 Billion.
Ethereum is the second most ranked cryptocurrency after Bitcoin in market capitalization. Thus it is not surprising that Ethereum is affected by the price and sentiments of Bitcoin.
Other Tips When Buying Ether
The price of the Ethereum will generally remain the same across all the exchanges. Essentially, they only trade with other people on the exchange they’re using. Thus, the prices will differ slightly from one exchange to another.
Identity verification is mandatory through all cryptocurrency exchanges across the United States. Each exchange will have different money transfer policies and must comply with anti-money laundering laws.
Traders should take professional advice while reporting long-term and short-term capital gains on cryptocurrency while filing for a tax and should keep detailed records of all the trades.
Traders need to understand that the volatility of a cryptocurrency which enables them to make a profit, the same volatility can also be like double-edged swords and thus can also end up in a loss.
How Ethereum fits into your portfolio
If you have invested in a traditional stock market, you know you can always liquidate your assets as and when you want. You can adjust your portfolio if some assets are not performing to your liking or add some stocks that are sure to give you good returns. Investing and trading in a traditional stock market is a sure way to increase your wealth through passive income.
When you consider Ethereum or any other cryptocurrency, investing in it is not a bad option. As we have already discussed the prospect of investing in a traditional stock market, you can have a passive income while investing in the crypto market.
One thing we can observe is that when the world was gripped under the clutches of Covid-19 and the rest of the markets, like the stock market, collapsed, the crypto market was still booming. Many people lost their jobs, and the only source of income was crypto trading.
Creating a cryptocurrency portfolio is a good and viable option. Although people might be confused or scared to enter a crypto market due to volatility, the amount of money one can make is astounding. Many became billionaires just by trading in crypto. Some trade may present a pessimistic approach towards cryptos advocating that some more time should be given before accepting cryptocurrency as an investment option.
Nonetheless, cryptocurrency has tremendous potential and is here to stay for a long time. Many traditional financial institutes are taking clues from the cryptocurrency market and presenting a regulated version of the crypto market.
Investing in Ethereum and other cryptocurrencies
As per the experts, while you consider making a cryptocurrency portfolio, it is beneficial to include the most popular cryptocurrencies like Bitcoin and Ethereum. The reason is when you create a portfolio in the stock market; you also include some Blue Chip companies from different sectors. The thought is that while the rest of the stocks may or may not perform when the market is bearish, the chances of the portfolio’s value would not be as bad as the one without Blue Chip companies.
When we consider cryptocurrencies, the volatility is massive compared to the stock market, and when the crypto market is bearish, the valuation of the portfolio may suffer. This is the same reason for investing in cryptos like Bitcoin and Ethereum. No matter how far the crypto market may fall, your portfolio will always look good, no matter the market condition.
The chance of investing in an IPO is also risky as most the IPOs collapse within a year, while some are made purely for scam.
Make sure investing in Bitcoin and Ethereum does not get in the way of saving for emergencies. Rather, invest in conventional retirement plans, and pay down high-interest debts.
Investing in crypto should be considered a high-risk asset and should not exceed more than 5% of your total portfolio. Since cryptocurrencies are known for their daily fluctuation of prices and even hourly, you should be comfortable with such scenarios. Therefore, you mustn’t be disheartened if the price is low on certain days. Although the price won’t remain bearish for a long time, eventually, the bearish trend will discontinue.
While trading in cryptocurrencies, you should be willing to lose as much money as you can afford to. It is thus advisable for you to plan for long-term investment and trade as per your financial appetite and your style.
As cryptos are volatile, you should know that there is no get-rich-quick mantra. Instead, you need to study the market closely and take action based on your research rather than others’ opinions.
You can make enough profit by trading daily instead of trading a huge amount in a single attempt.
Comparing Ethereum with Index funds
Index funds have been there for a long time, roughly 50 years. Bitcoin has been in the market for over a decade, and Ethereum is roughly seven years.
Index funds are more predictable and help build wealth over a long period. While some people invested in Ethereum when the price was merely some dollars, others have lost many due to fear of missing out syndrome. Even so, Ethereum is far less predictable and a highly volatile asset compared to Index funds.
When you consider Index funds, your wealth will keep increasing over 5, 10, or 15 years, and you will have a lot of money when you liquidate your assets after a long period.
How much ETH you can afford
“How much are you willing to give up?” is a better question. You should invest in Ethereum based on your risk tolerance. Again, you can start by investing $10 or $1000. The only catch is that you should be in such a frame of mind that losing this amount of money won’t hurt you much.
For this reason, you shouldn’t touch your retirement money or savings while investing in cryptocurrencies. However, the chances are that Ethereum will appreciate as any other cryptocurrency in the future as now the market never endures prolonged spells of a bearish phase. Finally, a time will come when it will be bullish, and then you will look at fantastic investment returns.
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Frequently Asked Questions
How did Ethereum start?
In 2011, Vitalik Buterin, at 17, got curious about Bitcoin and started Bitcoin Magazine, where topics related to blockchain, the math involved, computer science, and economics were published. In 2013, Buterin published a white paper proposing a new cryptocurrency project called Ethereum.
In 2014, Buterin was bestowed with Thiel Fellow for his incredible innovation and received $100,000. After dropping out of the University of Waterloo, Buterin wanted to make Ethereum a reality. The project quickly picked up the pace with the help of other developers and co-founders. Thus in 2015, Ethereum went live.
How does Ethereum work?
Ethereum’s goal was to be a platform on which developers could build their applications and not be a cryptocurrency. It was supposed to serve as something close to an internet where other developers could run their applications like email, online games, social media, music, and photo sharing.
This is what Ethereum does in reality. Roughly 2,000 different applications that are live use Ethereum as a platform.
Although the internet has a broader application, one must not compare the success of a wide range of applications that run on the internet. Ethereum is roughly seven years old. One must remember that the Ethereum network is still new and has a vast potential to grow, even further than the internet.
Furthermore, Ethereum runs on the blockchain, decentralized technology. Thus if you compare your music or pictures being stored on a cloud, in reality, there would be a computer somewhere physically present storing your music and pictures. Thus if the computer gets hacked or crashes, all the music and photos stored will be lost forever. That is not the case with Ethereum; all the data stored is spread across a network of computers. So, you can still retrieve your data if one computer gets hacked or crashes.
How do I invest in Ethereum?
Before investing in Ethereum, you need to research how cryptocurrencies work and how they are traded. Several crypto exchanges are available on the internet. You need to check the one that suits your style.
If you are interested in a crypto market and want to start trading Ethereum, you can always approach us on the Blockchain Tradein. We have experts to clarify all your doubts regarding cryptocurrencies. In addition, our experts will also guide you in a better understanding of cryptocurrencies. Although every cryptocurrency uses blockchain technology, they differ in their functionality.
We have broken down the procedure into simple steps for you to follow.
Open an account on Blockchain Tradein, and fill in the details.
You need to verify your identity through the email you receive.
Fill in the details to confirm your identity through valid government-approved identity proofs.
Once your account has been verified, you can search for Ethereum by adding ETH, an Ethereum ticker, and click on the “Buy” tab.
You can then select the mode of payment, either through a debit or credit card.
Alternatively, if you hold other cryptocurrencies, you can exchange them for Ethereum.
If you cannot buy Ethereum as a whole token, you can even buy them in fractions.
Once you have bought these tokens, now you need to store them.
You can store online through an e-wallet, or if you wish, you can store them offline.
If you select an online e-wallet, you need to save your wallet address and the private key. The e-wallet address is used for receiving Ethereum or cryptocurrencies, and the private key you need to generate gives you access to your e-wallet. Keep both the e-wallet address and private key under lock and key.
When you wish to receive tokens, give the sender your e-wallet address.
You can now start trading Ethereum.
Where do I keep my Ethereum?
Once the process of buying Ethereum has been processed, you can store your Ethereum either in an online e-wallet or in a hardware offline e-wallet. You can either store them online using an e-wallet provided by the exchange or buy an e-wallet online or through a retail store.
There are third-party cryptocurrency e-wallets available online called “Hot Wallets” and “Cold Wallets,” the offline ones.
A Hot Wallet is connected to the internet, allowing you access through a smartphone or a computer. It is like software and is quite accessible and convenient too. Since they are online chances of your e-wallet account getting hacked are more.
On the other hand, a Cold Wallet is hardware that literally stores your virtual currencies in a physical e-wallet. They are quite expensive compared to Hot Wallet and usually cost around $50 and $200. Since they are offline, they are not exposed to the threat of a cyber attack. These wallets are ideal if you have a huge amount of money stored in Cryptocurrencies.
What does the future hold for Ethereum?
As of now, the experts are not sure what the future of Ethereum looks like since it is a relatively new financial asset class. Some feel that financial transactions are bound to change in the future. People are looking for a viable borderless transfer of funds with minimum charges for the transaction fees.
Ethereum has revolutionized the way money transfer is being used currently. People are saving a lot while transferring funds from one place to another. So the future looks bright for cryptocurrency since the same technology can be further evolved and applied elsewhere.
What Ethereum has brought to the table has not only changed the outlook of cheap and faster borderless transfer of funds but also the blockchain technology used that powers the cryptocurrencies.
The very fact that El Salvador is planning a crypto-based city, the US Federal Reserves are also keen on launching their version of digital currency, and Miami is giving incentives for buying homes in cryptos, are signs enough that the cryptocurrency is here to remain for a long time.
