How to Buy Ethereum

Although bitcoin is the top cryptocurrency with characteristics no other crypto has reproduced, Ether (ETH) is also a popular take on digital assets. Like bitcoin, ETH has represented a good investment opportunity for years. Had you bought $1,000 worth of ETH in August 2015, your investment would have appreciated to over $2 million by now. 

ETH’s purpose is different from bitcoin’s. While the latter acts as digital cash or gold, ETH is a platform optimized for smart contracts and decentralized applications like NFTs.

ETH derives its value from its status as the currency of the Ethereum network. 

So how do you buy ETH?

While ETH’s function may differ from bitcoin’s, you can buy it in similar ways. 

Your first practical step toward buying Ethereum is to find an exchange, broker, or ATM that sells the cryptocurrency. Most ETH owners have acquired their digital assets through exchanges like Coinbase. 

Step 1: Determine the Risk You Are Willing to Assume

Like any cryptocurrency investment, ETH can be risky. Its price seems to follow bitcoin’s lead but that offers no guarantees. Bitcoin itself can be highly volatile and still prone to manipulation from various whales and celebrities. 

ETH has yielded significant returns for investors, especially for long-term holders. Like bitcoin, however, it has gone through several cycles of boom and bust. When you buy ETH, you set yourself up for this volatility. If you feel you can’t handle portfolio value drops of more than 50 percent, you might want to consider a different type of investment. 

Step 2: Find an Exchange

You can go to an exchange, trading platform, or even an ATM. As long as you get your ETH, we can consider your mission accomplished. What should you consider when evaluating a trading platform? 

Trading platforms come in many shapes and sizes. Be sure that you understand how the trading platform works before you use it to buy any ETH. 

  • Many online brokers advertise crypto-related services. Understand that the majority of CFD brokers do not allow you to buy actual cryptocurrencies. They merely offer financial derivatives that use the various crypto-fiat pairs as their underlying asset. By trading such derivatives, you bet on the price evolution of an asset. 
  • Some crypto services, like Revolut, Cash App, and Robinhood, may allow you to buy “paper” ETH. You get the ETH in name only, meaning that you can’t withdraw it from the app to an external wallet. Whether any actual ETH covers these purchases is not entirely clear. 
  • Actual crypto exchanges, like Coinbase, let you buy ETH from other users, matching buyers with sellers in real-time. To register an account with such an exchange, you must provide a wealth of personal information. On the upside, such exchanges give you wallets in which you can store your ETH until you withdraw it to an outside wallet. 

Selecting your exchange carefully is important. You don’t want to wake up to your ETH stack stolen in a hack or lost through the negligence of the service provider. Here’s what you should consider regarding the safety and quality of the services your exchange offers: 

  • Although cryptocurrencies are mostly unregulated, many exchanges have some form of regulatory backing. Trading with an exchange that is regulated in your jurisdiction is the healthiest move you can make. 
  • Look up the location of the exchange’s headquarters. Is it somewhere legally safe? 
  • Does the exchange have a license from a local financial authority? 
  • Is the website of the exchange secure? 
  • Are users’ funds safe? 
  • Is the exchange reputable? The crypto community talks a lot. If you know where to look, you can glean valuable, real feedback on crypto exchanges and their services. 

Step 3: Creating and Funding Your Account

When you create your cryptocurrency exchange account, you must verify it before you can start using it. Some exchanges require several verifications before you can use the full range of their services. 

Most of the time, you will deposit money to your exchange account through your bank. Before you open and verify your account, ensure that your bank allows you to deposit your money with a crypto exchange. Some banks may place restrictions on such transfers. 

Review the fees your exchange levels on deposits and use the method with the lowest cost. 

Step 4: Buying Ethereum

Don’t let the seemingly steep price of one ETH deter you from buying any. As with bitcoin, you can buy a fraction of an ETH. Place your order and wait until the system fills it. Unlike legacy assets like stocks and commodities, cryptocurrencies trade around the clock, seven days a week. 

Be prepared that it might take a while for the system to fill and process the order. Depending on the interface your exchange uses, all you need to do is enter ETH in the “buy” field and fill in the amount you want to buy. 

When you buy ETH at an exchange, you buy it from other people like yourself. As  soon as your transaction is complete, the ETH lands in your exchange-provided wallet. 

Step 5: Storing Your ETH

Keeping your ETH in your exchange-provided wallet is never a great idea. Although the best-known exchanges keep their clients’ crypto funds in cold wallets, you are always best off if you keep your digital assets in your own wallet. 

Your options in this respect are hot and cold wallets. 

  • Hot wallets reside on devices that are connected to the internet. Hacking into such wallets is relatively easy. Thus, your crypto assets are not as safe as they should be in a hot wallet. 
  • Cold wallets are offline wallets. It is physically impossible for hackers to pilfer your asset from such wallets. The best bet cybercriminals have is to convince you through some ruse to send them your ETH voluntarily. 

Alternative Ways to Buy ETH

You can also buy ETH and other cryptocurrencies through ATMs and various services putting buyers into contact with sellers. 

If you want to buy ETH using a cryptocurrency ATM, show the QR code reader of the machine your wallet address. Wait for it to recognize your address as an ETH one and confirm it. Put banknotes into the appropriate slot on the ATM. Hit send, and confirm the transaction. 

Be mindful of the ETH gas fees. When the gas fees are high, buy transactions can be expensive, and you may end up with a lot less ETH for your fiat than you expected. 

Selling ETH works similarly to buying it but in reverse.