How to buy Ethereum – Forbes Advisor UK

How to buy Ethereum - Forbes Advisor UK

While Bitcoin is the first cryptocurrency based on the value of its coins in circulation, Ethereum is no slouch. With a market capitalization of over £240 billion, it is the second-largest form of cryptocurrency and enjoys the support of business leaders such as Mark Cuban, the American billionaire entrepreneur and TV personality.

Moreover, it is a profitable investment choice. If you had invested £1,000 in Ethereum in August 2015, your investment would have been worth over £1.6 million six years later.

Here’s how to start buying Ether, the official name of the token more commonly known as Ethereum due to its association with the Ethereum platform it powers.

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Buy Ethereum

Investing in Ethereum may be easier than you think. Here’s how to get started in just five steps:

1. Determine your level of risk

There is no getting around the problem – buying Ethereum is a gamble. Although all investments carry some risk, cryptocurrencies are particularly vulnerable to price fluctuations. Just think of the impact a few hundred characters can have on crypto prices: when Tesla boss Elon Musk tweeted last year that his company would no longer accept Bitcoin as payment, for example, the value of the coin has dropped by 15%.

Although Ether has had impressive returns in the past, it has also experienced significant crashes, sometimes in surprisingly short timeframes. Notably, it fell from a high of nearly £3,000 per coin in May 2021 to less than £1,300 a month later, a drop of more than 50%. That’s pretty extreme volatility.

This is why it is important to consider your risk tolerance as well as the diversity and stability of the rest of your investment portfolio before buying Ether. Experts recommend never investing more in crypto than you can afford to lose.

2. Choose a crypto exchange

Buying Ether is more complicated than simply buying stocks or mutual funds through your brokerage account. Cryptocurrencies are not traded on major exchanges like London or New York, and many brokerages do not offer crypto investing.

To buy crypto, you must first create an account on a crypto exchange. In practical terms, it’s like the brokerage platforms you may be more familiar with: crypto exchanges allow buyers and sellers to exchange fiat currencies – such as pounds and dollars, for example – for crypto- currencies such as Ethereum, Bitcoin or Dogecoin.

If you don’t have a crypto exchange in mind yet, check out our list of the best cryptocurrency exchanges to find the right one for you. Although some trading platforms can be complex, most offer a simple buying interface for beginners, although it may charge higher fees than the main trading platform.

A few key points: When choosing an exchange, make sure they offer a crypto wallet to store your investments. The vast majority do, but if yours doesn’t, you’ll have to buy one yourself.

And if you are a real beginner, you can always use a platform like Robinhood or Cash App. This will greatly simplify the process of buying crypto for you, but it has a hidden cost: you cannot withdraw your Ethereum investment to put it in a third-party wallet or use it to pay for online purchases.

Using one of these simplified platforms means that your crypto can only be traded on the platform you buy it on. You will therefore have to withdraw money from this platform and then redeem it on a crypto exchange to keep it in a separate wallet.

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3. Fund your account

Before you can buy Ethereum through a crypto exchange, you need to fund your account. In most cases, you will deposit money from a bank account, such as your checking account. You can also usually use a debit card or deposit money with a payment provider.

When choosing a funding method, consider the fees of the crypto exchange as they can vary depending on the method. For example, a platform may charge a fee of a few percentage points for a debit card transfer.

A word of warning: some platforms allow you to buy cryptocurrency using a credit card. Although it may seem tempting, credit card companies generally treat cryptocurrency purchases as cash advances. Depending on the card you have, you may have to pay a higher interest rate and cash advance fees on top of the crypto exchange fees.

4. Buy Ethereum

Investors buying stocks, mutual/mutual funds or exchange-traded funds are restricted by market hours. For example, the London Stock Exchange trades between 8:00 a.m. and 4:30 p.m. and is closed on weekends and public holidays.

Cryptocurrencies such as Ethereum work very differently. As they are decentralized currencies, you can buy and sell them around the clock.

To buy Ethereum, enter its ticker symbol – ETH – in the “buy” field of your exchange and enter the amount you want to buy. If you don’t want to buy a whole Ethereum token or you don’t have enough money in your account for a whole coin, you can buy a fraction of it. For example, if the price of Ethereum is £2,000 and you invest £100, you will buy 5% of an Ether coin.

5. Store your Ethereum

Once your Ethereum purchase has been processed, you need to store your cryptocurrency. While some platforms will store it for you, some people choose to store their investments themselves to reduce the likelihood of losing their crypto to a hack.

This is understandable, but it’s also important to note that most major exchanges insure their clients’ holdings and often store the majority of their assets offline to prevent mass thefts. Also, historically, exchanges that have been hacked have refunded all losses.

But if you want peace of mind around your crypto, you can choose to move it to one of two types of third-party wallets:

  • Hot Wallet: A hot wallet is connected to the Internet and accessible from a computer or smartphone. They are convenient and are usually provided by cryptocurrency exchanges at no additional cost, although you can also use your own if you prefer not to have your crypto on exchange. However, since they are always connected to the Internet, they are at a higher risk of security breaches.
  • Cold Wallet: Cold wallets, on the other hand, are external devices that are completely disconnected from the internet. Depending on the type you choose, they usually cost between £30 and £150, although there are even more expensive versions. Although cold wallets are less convenient than hot wallets – you have to manually connect them to the internet each time you want to access your crypto – they are more secure and may make sense if you have a significant amount of Ethereum or Bitcoin. other cryptocurrencies.

Sell ​​Ethereum

To sell your Ethereum, simply return to your crypto exchange and enter the amount you wish to sell.

If you are selling a significant amount of crypto, you may want to consult a tax professional. Despite its decentralized nature, profits from a sale of crypto are potentially subject to capital gains tax.

Should I buy Ethereum?

Ethereum is hugely popular, with over 116 billion coins currently in the hands of investors. But just because it’s one of the best-known cryptocurrencies doesn’t mean it’s right for you.

Before buying a volatile investment like Ether, you’ll want to make sure you’ve done your research and your finances are in good shape. Ideally, you should have a large “rainy day” fund, exposure to minimal debt, and healthy pension plans. While you can tick all of these boxes, it’s important to diversify your portfolio, so only a portion of your investments should be in Ethereum or other cryptocurrencies.

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