Can you make money investing in 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.
Now in 2018, Ethereum is on the rise and has increased by more than 5000%.
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 nearly $20,000 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? Before you understand how to invest, you need to understand what it is, right?
If you like computer jargon, you’ll love the definitions floating around the inter-web just now.
However if you’re a ‘normie’ like me, you won’t have a clue what any of the computer-speaking people are on about.
So here’s my easy to understand guide on what Ethereum is.
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 provide 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.
Many of the latest tokens from initial coin offerings (ICOs) are ‘backed’ by Ethereum which adds to the value of the platform.
Here’s an example: 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.
The price of Ether is volatile but has increased considerably in 2017 which begs the question: is it time you invested in Ethereum?
You can buy Ethereum on an exchange. That’s a website where you swap money or another cyrptocurrency for a given quantity of Ether. One of the most popular exchanges is Coinbase. But there are others including:
Once you’ve bought your Ethereum, you need to send it to a wallet. The easiest way to do this is to create a free one at MyEtherWallet.com
You’ll get your unique key and address that you can then print off and store. You can also receive Ethereum to your wallet address (Coinbase also provides a wallet service).
Is Investing in Ethereum a Good Idea?
Again, that depends. And this time on your risk tolerance. Digital currencies ) are one of the riskiest investments you could make. Especially if you don’t know what you’re doing.
However for early adopters of Bitcoin, accepting this risk has paid off. 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.
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.
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, unless you find a pizza place that takes ETH. Remember, you might have to pay capital gains tax on any increase in value.
The bottom line is this: You could make money investing in Ethereum. But the way you do it is important. People (like me) who bought in early have seen gains of 50 or even a hundred times. But as the value increases, this becomes less likely.
The smartest way to invest is to cost average into the market. That means buying a fixed value (say $50) every month of Ethereum.
Sometimes you’ll buy high, other times you’ll buy low but your gains will be greater over time – assuming you’re confident of the value going up.
Early adopters of Bitcoin are now taking this approach and it’s a way many investors buy into the stock market (which can be equally volatile).
Since I took this screengrab, Ethereum (ETH) has risen significantly.
Summary: You Can Make Money from Ethereum – If…
And it’s a big if..
Firstly you need an apetite for risk. If you’re prepared to see real volatility and changes in values, investing in ETH might work for you.
Also be prepared to do your research. Use resources like this, or the blogs of the various exchanges to gather information. Stay away from ‘Crypto Gurus’ – they’re probably trying to sell you something you don’t need.
There are a number of apps and sites that allow you to buy Ether (see the short list above). Many of these also allow you to buy Bitcoin too and other currencies 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. It’s also easy to use.
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/Bitcoin Cash. I also get $10 as a little thank you. Which is nice.
Buy your first Ether (and claim your $10 in Bitcoin) here.
P.S. I write on other topics and not just the latest cryptocurrencies. If you want my newsletter, sign up here.