It is common knowledge that Ethereum is one of the biggest cryptocurrencies in the world and only comes second after Bitcoin, the pioneer. But, according to the experts, when you compare the benefits of the two, it is apparent that Ethereum is leading the market because the platform provides the most groundbreaking solution for developing smart contracts. In all likelihood, it is expected to gain even more attention in the future. Let’s take a look at Ethereum and how to trade it:
First and foremost, you need to know that Ether and Ethereum are not the same thing. The latter refers to the blockchain-based software that offers a smart contract feature, while the former is a digital currency that’s traded on the exchange. Thus, when people talk about trading Ethereum, they are actually talking about trading Ether. Even though it is a novel phenomenon, Ethereum is still in its early stages due to which its price is affected by a number of events associated with its internal network, along with the movements in the market.
Like Bitcoin, Ethereum is also highly volatile and its price fluctuates quite regularly. It is based on blockchain technology, which serves as the basis of its computational services and transactions. When the network expands, Ether’s value, as well as that of related services, is going to be affected. An important thing to know about Ethereum is that it doesn’t have a cap-like Bitcoin in regard to the number of coins. Hence, like in the case of fiat currency, the price of Ethereum is determined through the forces of demand and supply.
Investing in Ethereum
There are a couple of steps you need to follow in order to start trading Ethereum. The first step is to open an account on an exchange of your choice. You will need to have some prior knowledge and should do some research to figure out which exchange will be the best one for your needs. In addition, you also need to consider your geographical location and regulations because they can have an impact on the choice of exchange. Most of the crypto exchanges that exist these days will give you the option of directly purchasing Ether.
This means that you will not be required to purchase an intermediate currency, such as Bitcoin. However, this may be a requirement for smaller platforms, so it is also something that you should consider when choosing an exchange. In order to top up your account with ether, you can transfer money through a credit card or your bank account. The most notable distinction between these two methods is speed, as the former tends to be instant, while the latter can take as long as a week.
Now is the time that you start trading Ethereum. You want to be able to sell the Ether you have bought for a profit and here, the use of the right strategy can make a big difference. As a matter of fact, this is considered the first step towards a profitable and successful outcome. There are different strategies that exist and it is up to you to use the one you find feasible. The options include:
Buy and Hold: As obvious, this particular strategy means that you buy a cryptocurrency and then store it in a safe place for the long-term. This means that you should use cold storage for storing the Ether you have bought and make sure the wallet you choose is reliable and protected. You can go with both hardware or paper wallets, as they are both secure options.
Hardware wallets are similar to USBs, which store your private keys, while paper wallets depend on an offline mechanism that gives you a printed version of the information needed for accessing your Ether. Either way, these options are quite safe and the least vulnerable to cybercrime.
Active Trading: Some element of speculation is involved in this particular crypto trading strategy and you need to use it cautiously. There are no standard rules that define when you should buy or sell, which means that the entire trading process depends on expectations and anticipation. Therefore, technical analysis is used often for calculating and predicting the next step. Placing alerts and minimizing losses is the most important thing in active trading because they can come in handy during the trading process.
There are various exchanges that give you the option of setting stop-limit orders, similar to the ones that you use in forex trading, for keeping your losses under a specific limit. However, it should be noted that this option is not available on all cryptocurrency exchanges, which means you have to manually set up all market movements. Hence, it is a good idea to put some thought into the exchange you decide to use for trading Ethereum if you plan on using this strategy.
Prominent Exchanges for Ethereum Trading
There are a number of crypto exchanges in the market that support Ethereum trading, but this doesn’t mean that all of them are suitable choices. You need to know the most prominent options in order to choose one. Let’s take a look:
Poloneix: This is an advanced trading platform for buying and selling Ether and it offers its services in more than 80 countries. Traders can get advanced charts and trading analysis tools and low transaction fees.
Kraken: You can exchange crypto into fiat and vice versa through the Kraken exchange and it is one of the few platforms that offer margin lending of about 5 times leverage.
Coinbase Pro: A solid solution for trading Ethereum, Coinbase Pro offers historical data, high-level charting tools, and effective order processing. The interface is also user-friendly and simple and it boasts progressive trading options.
Bitfinex: Known for its impressive digital trading volume, Bitfinex offers the option of financed and non-financed transactions. It is also known for offering impressive leverage to its traders.
You can choose from any of these exchanges to start trading Ether and reap the benefits of its price movements.