What to look for when buying Ethereum
Buying Ethereum for the first time can be a bit daunting. But there are plenty of great products out there, you just need to find the platform that’s right for you.
Here are some key questions to help you find the best place to buy Ethereum.
1. What fees will you have to pay?
Broadly speaking, there are three types of fees to watch out for:
- Deposit fees
- Trading fees
- Withdrawal fee
We’ll break them down in more detail below. Just be aware that fees are rarely standard across different trading platforms. For example, you might find a cryptocurrency exchange that offers free trading but charges you a lot of money to withdraw your funds.
Don’t be afraid to open a few accounts and experiment. But don’t deposit money until you’re comfortable with the fee structure.
2. How will the platform secure your assets?
Investing in cryptocurrencies is an exciting world, but unfortunately it has attracted its fair share of bad actors. And since this is a fairly new industry, it’s taken some time – and some high-level hacks – for major cryptocurrency exchanges to implement the levels of security you find at banks and other financial institutions.
If a crypto exchange or broker is not transparent about their security systems, this should be a major red flag. Sometimes you will read that a company does not want to disclose these details for security reasons, but that is misleading. There is a lot of information a trading platform can reveal without compromising its systems.
3. Are there any sign-up bonuses?
Various platforms offer sign-up bonuses for new investors. You can find a platform that gives you a small bonus when you start, or a platform that gives a bonus when you make a certain number of trades or deposit a certain amount of money. Although they are tempting, don’t let them guide your decision making. It might be a great tiebreaker, but there’s no point signing up for the wrong exchange just because you want the bonus.
4. Is it available in my country or state?
Some cryptocurrency exchanges cannot operate in the United States, and only a handful are allowed to operate in each state. For example, New York has one of the strictest crypto exchange regulations and will actively pursue rule breakers. As such, it’s good to check that the exchange you want to use is licensed to operate where you live.
5. Does it have all the features you need?
If you are buying Ethereum for the first time, you will want an easy-to-use platform with lots of educational resources. If you prefer mobile apps to web browsers, look for an exchange with a good app.
Other useful features include:
- The possibility of setting up automatic monthly transfers
- Good customer service
- An external wallet
We’ll talk about wallets in more detail shortly. If you are an active Ethereum trader, you may also want advanced features such as limit orders and good charting tools.
6. Can I stake or earn interest on my Ethereum?
Ethereum is currently undergoing a major upgrade to a new system to make it more scalable, more durable, and more secure. Part of the upgrade is changing the way it validates transactions. Without going into the technical details, it will transition from a power-intensive proof-of-work model to something called a proof-of-stake system.
This means people can stake their ETH tokens to earn rewards – and you can already support the transition to the new network if you’re willing to link your ETH tokens. As a long-term investor, this is a great way to earn passive income from your Ethereum investment.
Another way to earn interest on your crypto assets is to participate in a loan-earning program. Essentially, a platform will lend your Ethereum and pay you a portion of the interest on the loan. Crypto staking and lending products come with risk, but if you want to earn passive income on your ETH, look for platforms with these features.
7. Does it have a wide selection of cryptocurrencies?
If you only want to buy Ethereum or Bitcoin (BTC), you won’t need an exchange with a lot of tokens. However, if you see buying Ethereum as the first step in a longer crypto-trading journey, a long list of altcoins is a bonus. It’s worth understanding an exchange’s policy on adding new coins as well – are they trying to filter out potential scams or are they looking to list as many coins as possible?
Check out our cryptocurrency exchange reviews for more options.
What is Ethereum?
Ethereum was the first cryptocurrency to introduce smart contracts. A smart contract is a small piece of code that lives on the blockchain, and it’s the technology behind the decentralized finance (DeFi) industry. Much of the decentralized applications are built on the Ethereum ecosystem, although Ethereum now has plenty of competitors who want to take some of its market share.
Where can you buy Ethereum?
You can buy Ethereum from almost any cryptocurrency platform. You can even buy Ethereum from some Bitcoin ATMs in the United States. Let’s look at the differences between apps, exchanges and brokers.
- Cryptocurrency brokers: Several traditional stockbrokers offer a limited selection of cryptocurrencies alongside their other products. This is a great option for people who want to add Ethereum to their investment portfolio without opening a new crypto exchange account. Be aware that most crypto brokers do not offer external wallets where you can withdraw and deposit your crypto assets.
- Cryptocurrency exchanges: This is the most common way to buy and sell cryptocurrency, and many exchanges offer plenty of ways to deposit fiat currency (like US dollars), reasonable fees, and a large list of coins exchangeable. On the downside, these exchanges may not adhere to the same level of regulation as stockbrokers.
- Cryptocurrency applications: Most cryptocurrency brokers and exchanges also have mobile apps to facilitate trading on the go. You can also buy Ethereum using payment apps like Venmo and Paypal.
What are the fees to buy Ethereum?
Different cryptocurrency platforms charge different fees, and unfortunately there isn’t much consistency in how these fees are calculated. With that in mind, pay attention to the following.
1. Filing fees
Fees vary depending on whether you want to deposit money by credit or debit card, wire transfer, or another method. A number of platforms allow you to deposit money for free if you use a bank transfer. Charges for credit card payments are usually 3% to 5%. If you have existing crypto assets on another platform, you will normally be able to deposit them for free.
2. Trading fees
Trading fees can eat into your profits and come in many forms. You may be charged a fixed fee or a percentage of the transaction. Several exchanges offer reduced fees if you pay using that exchange’s native currency. Sometimes the fees are built into the rate offered to you, which is the least transparent – it may look like there are no trading fees, but you will get less Ethereum for your dollars.
3. Withdrawal fees
The last fee to pay attention to is the withdrawal fee. These vary from platform to platform and crypto to crypto. Some exchanges give a certain number of free withdrawals each month. Most platforms list their fees for each cryptocurrency and they can range from a fraction of a penny to $100 or more. It is sometimes worth converting your assets to a cheaper crypto before making a withdrawal.
Where is it safe to buy Ethereum?
It is safe to buy Ethereum on most major cryptocurrency exchanges. However, there are various potential risks to be aware of when buying Ethereum. These include:
- The cryptocurrency app, exchange, or brokerage itself: Top-notch cryptocurrency exchanges keep the majority of assets in what’s called “cold storage.” This means it is offline and hard to hack. Unlike the money in your bank account, your crypto assets are not protected by FDIC insurance, so it’s great if the platform has its own third-party insurance. Also look for independent security audits and participation in bug bounty programs.
- Your computer/telephone security systems: Having an account with the most secure encryption platform in the world won’t help you if you have malware on your computer or if you use the same password for multiple accounts. Make sure your antivirus protection is up to date and enable two-factor authentication on your crypto accounts.
- The risks associated with investing in crypto-currencies: Ethereum is one of the biggest cryptocurrencies in the market, which makes it a safer bet than smaller coins. However, investors should be prepared for the volatility that is an integral part of these high risk investments. On top of that, there is a small chance that Ethereum will completely fail or the bottom will fall out of this industry. This is why it is important to only invest money that you can afford to lose, and to ensure that your crypto investment is only a small percentage of your overall portfolio.
- Where you store your crypto-assets: Many long-term crypto investors use an external wallet – often a hardware wallet that is kept offline – to store their assets. It may not be the right option for newbie investors, but it’s worth considering as the value of your crypto portfolio increases. A crypto wallet gives you full control over your coins.
Buying and securely trading Ethereum has never been easier. There are many great brokers, exchanges, and apps out there to meet the needs of all types of investors. Once you’ve explored the options and chosen a platform, all you have to do is deposit some money and convert it to ETH.
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