The process of buying Ethereum involves converting your U.S. dollars into the currency ETH, which is the Ethereum blockchain’s currency. In the field of finance, art and computer science, for example, people who own Ethereum can use it to pay for goods and services as well as to cover fees for the processing power needed to perform complex transactions.
In recent years, many Ethereum holders have used it as an investment vehicle. Ethereum hit an all-time high late in 2021, and its market capitalization has been surpassing Bitcoin’s.
Be aware, however, that cryptocurrency can be a volatile asset whose market value can fluctuate widely.
The most common steps people take when buying Ethereum are:
- Choose a Cryptocurrency Trading Platform.
- Decide how to pay.
- Store your Ethereum.
Choose a cryptocurrency exchange
As Ethereum is a widely-circulated cryptocurrency, you have many options for purchasing it. This decision will affect the options available to you for payment and storage, so you should do your homework. There are a variety of Ethereum Trading Platforms and marketplaces you can use.
Online stock brokers: One of the easiest ways to buy cryptocurrency is through an online brokerage, but it can have serious drawbacks as well. Despite the ease and cost of converting cash into cryptocurrency and vice versa, check the fine print to see if the brokerage allows you to transfer cryptocurrency in and out of the account. Crypto purists believe that owning a digital currency nullifies its entire purpose.
Centralized crypto exchanges: It is common for people to buy cryptocurrency using these methods. Coinbase, for example, is a centralized exchange that acts as a middleman for cryptocurrency purchases and sales, and tends to offer a greater selection than platforms that primarily deal with conventional assets. If you are somewhat familiar with cryptocurrency, but want a user-friendly experience, then these might be a good choice. Meanwhile, some people might think that a centralized broker violates the spirit of blockchain technology, which is supposed to be decentralized.
Decentralized exchanges:As a decentralized exchange, or DEX, there is no third party involved in trading cryptocurrencies. Coins or dollars you wish to trade on centralized exchanges must be deposited into a trading account. When you trade on a DEX, you retain full control over your funds and trade directly with a buyer or seller. Nevertheless, DEXs are difficult to navigate and are mostly used to trade one cryptocurrency for another, rather than purchasing ETH with cash. They’re not user-friendly for beginners.
Decide how to pay
It is up to you whether to pay with U.S. dollars or another type of cryptocurrency, depending on whether you already own cryptocurrency.
Fiat currency: You can buy cryptocurrency using traditional fiat currency like the U.S. dollar. On some exchanges, this is your only option. And if you don’t already own cryptocurrency, you’re going to have to use cash at some point. It is likely that you will have to fund your account using a bank transfer, a credit card or a debit card if you use a centralized exchange. Some platforms charge fees for these transactions.
Cryptocurrency: In certain marketplaces, you can trade crypto-to-crypto, which is helpful if you want to buy Ethereum without putting more money into the crypto market. You can also use this strategy if you own another cryptocurrency that has increased in value, such as Bitcoin, and want to diversify your holdings. Cryptocurrencies, however, constantly change in value. As you decide when to buy, look at historical price trends. Another thing to keep in mind: Trading crypto is subject to certain tax rules.
Store your Ethereum
You still need a way to securely store Ethereum even though it is a digital asset. You can do this through digital wallets, which store the private keys you need to access or spend your digital currency. A few online marketplaces that sell Ethereum also store them for you. It is important to consider the way an exchange handles storage when choosing one. While some exchanges allow you to use your own digital wallet, others have more limitations.