April 16, 2019

How to Invest in Ethereum

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Ethereum often stands out to investors in the world of cryptocurrencies. Learn how you can start investing.

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Ethereum offers big potential for investors. But there are risks, too. Here's what you need to know to start investing.

Ethereum is currently the third-largest cryptocurrency on the market (with a current market cap of $12.6 billion). But the idea of investing in a digital currency scares off many investors.

Cryptocurrencies' high volatility makes them a bit riskier than traditional investments. There's a big "risk/reward" element crypto investors have to consider. But Ethereum is a bit different.

New to the world of cryptocurrencies? Check out this article on How to Invest in Cryptocurrencies to get a better understanding of the tools, strategies, and investing options you can use.

Ethereum is more than just a currency—it's a business platform as well. This impacts its investment potential in a few different ways.

Find out about the key differences next, as well as the ways they impact how you invest.

How Ethereum Differs

Cryptocurrencies like Bitcoins (and others) want to remove centralized banks in order to streamline monetary transactions. Ethereum's goal is to create a peer-to-peer platform to run digital applications and monetize tasks.

Ethereum does this through smart contracts. These function just like normal contracts, except they are completely digital. They utilize the same network technology that other cryptocurrencies use and offer companies a fast and secure way of issuing tasks.

You Should Know: This network technology is called "Blockchain Technology". It ensures that transactions are fast, anonymous, secure, and accurate. It's the backbone of digital currencies.

Ethereum charges people depending on how much of their network they use. The more a company needs to use, the more it costs.

That cost is paid for with the digital currency Ether. This is what you invest in when you invest in Ethereum. Think of Ether as gasoline and the Ethereum network is the car. The farther you want to go, the more gas you need to use.

You Should Know: The term "gas" is often used to describe Ether. It's not uncommon to hear things like "how much gas will that cost?" when referring to Ether transactions.

Ether has a dollar value and can be traded on an exchange just like other cryptocurrencies. This system gives Ether a few unique features among the cryptocurrency crowd.

  • Ether disappears once it's used: When you spend a Bitcoin, it recirculates in the system. When you use Ether in the Ethereum network, it disappears forever.

  • There is no limit to how much Ether can be produced: There will only ever be 21 million Bitcoins created. As for Ether, there is no limit as to how much can exist. Money supply economics therefore work differently with this cryptocurrency.

  • Ethereum has more industry support: Because Ethereum has an application besides being a monetary device, it is seen as being a more "practical" currency.

    Some people think that this means it has a more promising and "less risky" future—but there's no solid evidence to back this claim.

In other words, Ether isn't like other digital currencies. Its value comes from how business entities are invested in the network, rather than intrinsic valuations from individuals.

Ether still acts like a digital currency in many regards. So many of the investment techniques will be the same as other currencies. Keep reading to learn more.

How to Invest

Just like other currencies, Ethereum can be purchased and traded if you have a digital wallet AND access to an exchange. This is the easiest and most common way to invest in Ethereum.

Here's a list of digital wallets that accept Ethereum:

  • Mist: The official digital wallet of Ethereum. You can download it directly onto your computer (there is currently no mobile app).

    Transaction fees vary depending on the network or wallet you're using.

  • Jaxx: This is a multi-currency wallet that allows you to trade different cryptocurrencies. It can be downloaded on a computer or a mobile device.

    Jaxx offers news, market prices charts, and a portfolio overview. It has a variable transaction fee that takes a small percentage of your Ether.

  • Coinbase: Another multi-currency wallet, Coinbase allows you to set some automatic buying and selling conditions. There is a transaction fee of 1.49% in the US.

  • MyEtherWallet: This is an open source wallet that you can use in a web browser or by downloading it onto your computer.

    There is a variable transaction fee that takes a portion of your Ether.

Once you have a wallet picked out, you can start buying Ether. The smallest unit of an Ether is called a Wei, and is 0.000000000000000001 of an Ether. This means you can start investing for less than the per-unit value.

You Should Know: You aren't necessarily allowed to purchase the smallest unit of Ether. Most exchanges and wallets have a minimum purchase requirement. For CoinBase, their minimum purchase is $2.

Once you have some Ether, trading it is a lot like trading a stock. Your exchange will show you the current price. Then you decide when and how much you wish to trade. You can hold on to it for a while or make multiple trades in one day.

Because it acts like a stock, you can implement many stock trading strategies.

  • You can download a trading bot to trade for you.

  • You can trade between multiple digital and foreign currencies.

  • You can jump exchanges.

Other Exchanges

Here's a list of popular exchanges that accept Ether if you don't want to use your wallet directly:

  • CoinBase
    One of the easiest to use and most popular, CoinBase is computer- and mobile-supported.

  • CoinMama
    An exchange that offers multiple digital currencies, CoinMama acts like a brokerage service.

    You submit an order and payment, and they fulfill it. Transactions are almost instant.

  • Kraken
    This is the largest exchange in Europe, though it supports the US and Canada as well. It offers users the ability to customize trade deals. It has access to multiple currencies.

  • Gemini
    A US-based exchange that operates in Canada, the UK, and Asian Pacific regions. Gemini offers trades with Bitcoin and Ethereum.

    It has low transaction fees and is highly secure.

Your ultimate strategy will mostly depend on how often you want to trade, the amount of risk you want to take, and your investment goals. There's no right or wrong way to trade. You will tailor your own strategy.

You Should Know: You need Ether to implement smart contracts on the Ethereum network. People using Ether in the network get it like everyone else, through an exchange. However, you can sell Ether directly to someone through a digital wallet.

Indirect Ethereum Investment Options

Ethereum doesn't offer many indirect investing options. Most startups that use Ethereum are privately traded.

Major tech firms, like Intel and Microsoft, are using Ethereum. By investing in their stock, you are technically (and VERY subtly) indirectly investing in it.

A few crypto IRAs let you use Ethereum to build toward retirement. CryptoIRA and BitIRA are two of the options available.

The crypto IRAs act like most exchanges and wallets, except they put the gains in an IRA. You choose how much you want to invest and which currency you want to invest in. They take care of the rest.

Other than that, you'll have few indirect investment options with Ethereum. If you want more indirect investing options with a cryptocurrency, you should go with Bitcoin.


Ethereum is a great place to start investing in the complicated world of cryptocurrencies.

Because it is valued as a digital utility and a digital currency, Ether has the support of many companies and software developers. Therefore, it has the potential to stay active for quite some time.

Evan Manwell is a content manager at CreditDonkey, a crypto comparison and reviews website. Write to Evan Manwell at evan@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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