A Complete Guide to Trading Ethereum for Beginner
Trading Ethereum is not difficult if you’re familiar with Bitcoin trading and blockchain technology. But since the technology is complex to understand, relatively new, and still perfecting itself, it’s difficult to understand how it works quite easily.
Of course, there are many videos where you can learn individually in detail about Ethereum technologies. But in this article, we are going to talk about exclusively everything we think you should know about getting you familiar with Ethereum, how it works under the hood, what technologies it is using, trading Ethereum as a beginner, and much more.
What is Ethereum (ETH)?
Ether is the name of the cryptocurrency people mistakenly call as Ethereum. It is the native currency of the Ethereum project led and developed by the Russian-Canadian programming prodigy Vitalik Buterin.
Ethereum is an example of creating open-source, decentralized software application platforms using blockchain technology while still using it as a digital currency. Most people mistake Bitcoin and Ether as the same thing even though the reality is quite the opposite.
Ethereum emerged exactly six years and six months after the rise of Bitcoin. The idea of Ethereum was to work on the flaws of Bitcoin and perfect those loopholes to diversify its scopes of usage.
The way Bitcoin was used allowed Vitalik to think otherwise about exploring the usage of Ethereum. He soon realized that people could make decentralized applications using the power of a supercomputer and using the blockchain technology on top of it.
The project was finally launched in the market in July 2015 and got an immediate positive response from people who pivoted their fundraiser to collect $18 million in just a matter of 42 days. Now, in 2020 almost 91 million users are using Ethereum for multiple purposes.
How does Ethereum Work?
Ethereum is a fusion of many cutting-edge complex technologies that still seem unbreakable and unchangeable as of 2020. It creates a distributed computing system by using the power of one or more supercomputers coupled with the blockchain technology that saves and tracks the real-time public records of any transaction that had taken place. The records are saved concurrently in all of the connected computers on the Ethereum network in real-time.
Each record in the book of records i.e., the universal ledger, is heavily encrypted by using encryption algorithms that are almost impossible to crack. The universal ledger records anything like – creating a financial contract, keeping debt, registries, sales records, etc. Since the record gets updated in real-time without the interference of any human or third parties, it acts more like a trustless system. These records are called smart contracts.
Smart contracts have the ability to store data, information, fact, balance, associations, and other information required to understand the stored data in real life. In other words, smart contracts can digitalize a legal contract between two parties without being involved with any of them.
Overall, Ethereum can be labeled as a decentralized platform for software applications or otherwise called dApps. Ethereum is not a currency but a platform for running these dApps, and once they are deployed in the platform, the software works on the nodes (computers) as instructed in the code. So, even if you build the application, you will have no leverage over how the smart contracts work.
How to Trade Ethereum?
There are lots of online brokers that offer Ethereum trading. In 2020, the return of Ethereum increased more than 77.7% despite crashing badly back in March. Interpreting charts and data points, spotting good trades can increase your chances of getting good returns.
Ether can be traded in two different ways.
Firstly, a user can buy on exchange the actual cryptocurrency. For example – buying Ethereum (ETH) for United States Dollar (USD) from a broker. In this way, the user is the direct owner of the Ethereum, and this process is called long-term investment. The idea here is to hold onto the ETH you have until ETH’s price in the forex market increases significantly. In that case, the user can liquidate the ETH for cash.
Secondly, ETH can be traded for CFD or otherwise called a contract for difference. CFD is a contract between the investor and the CFD provider. It is a financial instrument that agrees to pay the difference between the opening price and a closing price that the user is holding on to. Since the users use this process to gain profit in a short time, it is a good short-term investment for the traders. You can speculate the ETH/USD currency pair to trade Ethereum CFDs.
Ethereum Trading Platform
You can buy Ethereum from a number of Ethereum exchange platforms.
Ethereum can be bought or sold on cryptocurrency exchanges using a wallet and a wallet number. The wallet and the wallet number can be compared with a bank and a bank account. Users can trade currency for currency in these exchanges, such as – ETH for BTC, ETH for USD, etc.
The exchange usually has a list of prices for each currency pair. So, you can choose a pair for trading and get it for a specific price. It is possible to trade Ethereum with fiat currency or digital currency. Fiat currency means – using US Dollars, Euros, or the user’s local currency to purchase Ether.
- Trading Platforms:
Trading platforms allow sellers and buyers to exchange currencies without getting directly involved with each other. Simply put, trading platforms act as a third party between the buyer and the seller through a website.
Trading options offer the cheapest deals for cryptocurrency exchange because the platform searches for the seller based on the customer’s selling price.
Brokers are the most reliable place to buy Ethereum since they offer their renowned services worldwide. So, most trades are conducted as cleanly as a whistle. But it comes with a price because buying ETH, BTC, or any cryptocurrencies from the brokers is expensive.
- P2P Marketplaces:
p2p or peer to peer marketplaces allow the buyer to get in contact directly with the seller. In this way, both parties can negotiate the price while availing a lot of other options that include – payment gateways, payment methods, a list of supported countries, etc. Buying from the p2p marketplace is always a risk as it requires trusting an unknown person.
Now, let’s move on to mention some of the best Ethereum trading platforms:
eToro is a worldwide trading platform that deals in currencies, cryptocurrencies, commodities, stocks, indexes, etc. It is a relatively new and interactive trading platform that allows trading in several cryptocurrencies like – Ethereum, Bitcoin, Cash, Dash, Ripple, and many more. eToro is a good platform for people who are willing to do ETH trades to gain profits on short-term trades.
Bitstamp is one of the oldest and trusted brokerage services in the world. In late 2017, the company decided to incorporate 2 options on the trading platform for buying Ethereum. These are – using a trading platform, and the other is taking the help of brokerage service.
Bitstamp is an interactive platform, but since it’s a complete trading platform, it comes with a lot of trading options. So, it might seem difficult for starters, but once you get used to the whole system, you’ll like it very much. The trading platform is cheaper and preferred by most professional traders.
Binance is a complete trading platform that allows crypto to crypto trading using a credit card. So, you can either buy Ethereum using a credit card or exchange it for other currencies. The trading platform fees are low, with just 1% charges. But the brokerage fees are much more costly.
Best ETH Wallet
Now, with that out of the way, let’s talk about the best broker companies that deal in cryptocurrency exchange.
One of the most famous BTC and ETH broker is CEX.io. It has a complete trading platform while also featuring a wide range of facilities. They accept payments via credit cards, wire transfers, and even SEPA transfers if you live in Europe.
Besides, CEX.io is registered with FINCEN and applies the current KYC (know your customer) and AML (Anti-money laundering) standards. This only means that the platform extensively vets all of its users during signup prior to any kind of trading.
Coinmama is in the market since 2015 with its wide range of cryptocurrency trading options starting from BTC, ETH, and various other kinds of currencies. They sell ETH directly at a premium and put very convincing efforts into 24/7 customer support. Coinmama accepts payment in credit cards, debit cards, and also SEPA transfers. SEPA allows you to exchange at a cheaper rate as the fees drop significantly.
Coinbase is one of the most famous cryptocurrency wallets for buying and selling Ether. This broker has been around since 2012 and has the reliability of millions of cryptocurrency users across the globe. Ease of use and flexible offers are some of the reasons people prefer Coinbase over other platforms.
Bitpanda is mainly recognized as a BTC broker. But they also deal with buying and selling ETH. Specialized in the Eurozone, this international broker was founded in 2014 and since then, became one of the most popular options for purchasing Bitcoins and Ethereum.
Besides accepting payment from multiple platforms, it also supports more than 100+ countries for delivering coins in a very secure way.
Ether is the second most traded cryptocurrency in the entire world, right after Bitcoin. In comparison, Ethereum has more flexibility than its competitor – Bitcoin. When it comes to trading cryptocurrency, Ether gives the best output in terms of volume and range.
Here are some trading strategies for Ether in 2020:
1. Trend Following
For beginners, a basic strategy is to follow the trend line from the past. This strategy is commonly followed by all traders of all experience levels around the world. Identifying a strong trade and trading in the flowing direction of the trend can take you out of an incorrectly placed buy and sell entries and put you back on track. Indeed, a trend is your friend when it comes to trading.
2. Buying the Dip
This basic investment trick works only when the price of the given asset falls below its usual position or when it settles. So, you can say that it’s a good move in a bullish or steady market. So, the trend is either going sideways or downwards. ‘BTD’ trades are trades based on opportunity.
It involves analyzing charts, short and long-term movements, historical support trends, and laddering buys, and much more. So, the bottom line for this kind of trade is to buy at a lower price and take the opportunity to sell when the prices get back up. This gives you less room for making mistakes.
3. Technical Analysis
Technical analysis refers to the analysis of support and resistance levels that the market had failed to break for a very long time. This is a good approach to select the ideal entry points for buy and sell trades. In fact, it works best in a moderately volatile market. Technical analysis is also good for identifying trades.
4. Identify the Moving Average
Another ideal way of spotting good trade entry is by analyzing the moving average. Observe the charts from the last 10 days, and the insight from different chart positions will help you decide what the price is doing over a prolonged timeline. There’s a slow-moving average and a fast-moving average. So, learn carefully and observe.
Besides, developing a trading strategy is important in order to build a sustainable trading goal. The points mentioned here only act as a primer to the many strategies available online.
Most professional traders use the chart analysis tools to analyze the market beforehand and set the alarm to know when that specific trade is going into motion. Since no user can stay alert 24/7, you need a good strategy for day trading Ethereum.
Why Invest in Ethereum
Based on our understanding, the diversified usage of Ethereum allows a user of the platform to be connected with a third party or an unknown person without having to trust them. For example – buying or selling a car, renting an apartment, paying off installments or debts, placing a bet on the biggest soccer matches – all of these involve trusting a stranger that can be eliminated using Ethereum.
Ethereum as a platform can make way for a lot of opportunities. If you have space on your computer, you can rent it to other people for money, eliminating the use of Google Drive or Dropbox. If you wanted a taxi, then the car driver can directly offer you a lift without the use of any middle parties like Uber.
So, using an unbreakable and completely reliable platform eliminates the need for trust in unknown people, especially when Ethereum is taking care of that alone. This is why it is called the ‘trustless platform.’
Since Ethereum solves this issue, it makes the platform robust and dynamic for merging with newer technologies. So, it is a segue way to create a solution for new challenges, which ultimately explains why Ethereum as a platform is doing so much good for everyone.
In this regard, many experts have drawn a conclusion that Ethereum is exponentially decentralizing the global economy and at the same time influencing a lot of industries. It is backed by a number of famous Fortune 500 companies, which makes it even more reliable.
But, since its price is still volatile, there is a potential risk that its price may increase or decrease. But the way it seems right now, the options for decreasing seems to be a long way off from happening.
Is Ethereum worth buying?
Ethureum is the second-largest blockchain platform, which is overtaking the place of other cryptos. Experts believe that the price will grow further in the near future. So, buying ETH is the right decision.
Is Ethereum a good investment in 2020?
Yes, investing in Ethereum in 2020 is a good idea, especially when it’s demand and transaction rate had risen over 77% in just 2020. In fact, most experts believe that Ethereum 2.0 is going to bring even more value for ETH in the near future.
What is Ethereum Used for?
It is an open-source software-based platform integrated with blockchain technology. It enables peoples to conduct transactions without a middle man with decentralized apps (dApps). So the chances of fraud are zero here.
What will Ethereum be worth in 2030?
Historical evidence and determining factors suggest that the price of Ethereum has the potential to rise in the future. In fact, the market is expected to close at $500 at the end of 2019 whereas, it was sold for only $106 in 2014.
So, predicting the price surge for the next 2 years seems feasible but assuming the price in the long term is pretty impossible since the cryptocurrency trading market is very much volatile.
Besides, more cryptocurrencies are offering the same features as Ethereum had been launched in the market. So, it’s pretty much unpredictable to guess the price of ETH in 2030.
Will Ethereum overtake Bitcoin?
It is very clear that Ether is the competitor of Bitcoin, but at present, it can not overtake Bitcoin. However, experts think that the value of Ether will be $1000 at the end of 2020.
Should I buy Bitcoin or Ethereum?
Both of them will get an appraisal in the upcoming months. However, it is expected that the price of Ethereum will decrease to $1000.
Is Ethereum better than Bitcoin?
The preference between Ethereum and Bitcoin depends on the user’s requirements. Bitcoin is better for peer-to-peer transactions, while Ethereum is preferable for creating and building distributed apps and smart contacts.
The popularity of Ethereum and its versatile applications are the reasons for the exponential increase in trading Ethereum. As a beginner, your goal is to follow a sustainable plan to keep gathering Ethereum, whether by means of trading or buying it from a third party.
It is better to pay the broker when you are starting to trade cryptocurrency. But, once you get experienced with cryptocurrency trading, it will be easier for you to pay a premium and purchase Ethereum from the trading platforms to save more on the fees.