Can you make money from Ethereum? Recent price rises have seen ‘ether’ that powers Ethereum increase to all time highs, more than doubling in value in February 2017 and quadrupling between then and May in the same year.
Ethereum seems set to rise in value as more and more investors become aware of this latest digital currency.
Ether is a digital currency similar to the the more familiar and mainstream Bitcoin. More and more people are buying Ether with the hope that it will see value increases similar to Bitcoin’s stratospheric rise to a 2017 peak of over $4000 per Bitcoin
But is buying Ethereum as an investment a smart choice. Or would you be better putting your money somewhere else? Keep reading to find out.
What Exactly is Ethereum?
What is Ethereum? If you like computer jargon, you’ll love the definitions floating around the inter-web just now. However if your a ‘normal’ like me, you won’t have a clue what any of the computer-speaking people are on about. Even the simple guides leave me scratching my head.
Ethereum is basically a really, really (really) powerful computer that can do loads of really complicated clever stuff relating to real estate, financial and insurance calculations.
Ethereum can be used to create applications that provides a range of functions. And as those smart computer people continue to develop it, Ethereum will continue to grow and be able to do more and more complicated calculations.
Think about the last time your car insurance got renewed. How did the insurance company calculate your premium? With difficulty is the most likely answer. However the Ethereum supercomputer is set to tidy up these types of sums making them more accurate and fairer. Which can only be a good thing for all of us.
How Can You Buy Ethereum?
How can you buy Ethereum? The short answer is that you can’t. Well not exactly. What you can buy and now trade in is ‘Ether’ which is the digital tokens that Ethereum needs to do it’s sums.
Think of it like this: When you go to the arcade, you exchange your dollars or pounds for tokens to make the machines work. This is how Ether works. It is the digital equivalent of tokens at the arcade – they let you play the games. So Ether is the stuff that allows you to access the power of Ethereum.
The more calculations Ethereum has to do and support, the more ether will be required. There’s a lot more detail here.
The price of Ether is volatile but has increased considerably in 2017 which begs the question: is it time you invested in Ethereum?
The general trend of digital currencies is up. Is it time for you to invest?
Is Investing in Ethereum a Good Idea?
Again, that depends. And this time on your risk tolerance. Digital currencies (also called cryptocurrency – probably cos it sounds cooler) are one of the riskiest investments you could make. However for early adopters of Bitcoin, accepting this risk has paid off.
Plus, 1 Bitcoin will cost you about $1500 (time of writing) whereas Ethereum costs less to buy into. Early investors in Ethereum are hoping that it will one day exceed the value of Bitcoin.
Developers would suggest that Ethereum is going to be doing more and more of our sums so the value could go up.
Or this could be the next ‘tulip’ craze.
What do I mean by that? In the early 1600’s, tulips were the Bitcoin of the Netherlands in Europe. People bought and sold tulips for wild prices – sometimes the equivalent of hundreds of thousands of dollars today. What were they thinking?
Actually, no one really knows. But what we do know is that the bottom fell out that market BIG TIME. People lost a lot of money and have looked silly for the following 400 years or so.
One of the differences between Ethereum and tulip bulbs (there’s something I never thought I’d write) is that Ethereum has intrinsic value. Intrinsic value is:
The actual value of a company or an asset based on an underlying perception of its true value including all aspects of the business.
What this means is that because Ethereum has a function in the business world, the stuff that makes it work has real value. This is different to Bitcoin which is used primarily as a trading currency. Therefore Ether is closer to being a commodity like lead or oil that can be traded on the market but also has a use in industry.
Like the casino, you’ll need to cash in your chips at some point if you want your Ethereum back into dollars or euros to pay for stuff. Remember, you might have to pay capital gains tax on any increase in value.
The bottom line is this: You could make a lot of money investing in Ethereum.
Or you could lose it all and be part of a national laughing stock for several centuries.
Since I took this screengrab, Ethereum jumped up to a new £300 peak in 2017 before settling down to the £150-200 mark.
Where Can you Buy Ether?
There are a number of apps and sites that allow you to buy Ether. Many of these also allow you to buy Bitcoin too if that takes your fancy.
I buy my Ether at Coinbase. They have pretty tight security and a decent little app that has fun graphs and lets you buy digital currency using a credit card.
They also have a referral programme that pays out $10 when you buy either $100 or £100 in Ethereum and/or Bitcoin or even Litecoin. I also get $10 as a little thank you. Which is nice.
P.S. I write on other topics and not just the latest cryptocurrencies. If you want my newsletter, sign up here.
Update Autumn 2017: Since I wrote the spring update, the price of Ethereum went a bit bonkers and I made a ton of money from a modest investment. But don’t let the higher price put you off. Many analysts believe there is a future in Ethereum and digital currency as a whole.
Update Spring 2017: Since I wrote this, the price of Ethereum has quadrupled and I’ve made money. So the answer is ‘Yes. Yes you can make money investing in Ethereum’. Keep reading for more