The Ethereum network and its native cryptocurrency, Ether, became popular due to their usability beyond the crypto industry. While Ether fuels the blockchain for developers’ rewards, enhanced transactions, and voting, the blockchain has proved to be valuable for sectors like supply chain, healthcare, and banking.
Considering these technological developments, many would want to invest in the cryptocurrency, but the Ethereum price has significantly increased in the past years. Luckily, similar to Bitcoin, beginners can purchase fractional shares of Ether and diversify their portfolios without risking all their assets.
Besides, investing in Ethereum requires using several techniques that help understand volatility and market dynamics. While cryptocurrency is an essential addition to anyone’s portfolio, it can expose rookies to risks and mistakes. So, let’s see how they should approach Ethereum.
Analyze Ethereum pros and cons
Before allocating your financial resources to Ethereum, start analyzing the pros and cons of long-term investments. Cryptocurrency has many benefits for investors, including rapid development, which is one of the most important aspects of a crypto project. This shows stability and means for improvement, so risks are less prominent. Ethereum is secure, private and fully decentralized, making it a safe space for everyone, from investors to developers and validators.
However, Ethereum is still a volatile cryptocurrency. Although price movements are regular for cryptocurrencies, Ethereum can show more drastic swings due to its young age as an asset class. Indeed, its volatility is not the same as the first years on the market, but it’s still considerable.
Another drawback of Ethereum is its difficulty scaling. Validating transactions requires the participation of all nodes within the consensus, slowing down the process. Ethereum’s problems with scalability increase gas fees and trigger network congestion.
Find the most profitable way to buy ETH
If you decide the benefits outweigh the disadvantages, it’s time to find the best place to buy Ethereum. For example, the easiest way to purchase cryptocurrency is through an exchange, which offers regular payment methods like bank transfer, credit or debit card. Exchanges are accessible and easy to navigate, so they’re perfect for beginners. However, exchanges can be targets for cybersecurity attacks, so make sure you strongly protect your account through multi-actor authentication and complex passwords.
You could also use a brokerage app, but they usually have fewer features than exchanges. Buying ETH through peer-to-peer methods is also doable and you’ve got many payment options, but the risk of fraud is significantly higher than when using certified applications.
Best strategies to invest in Ethereum
Investing in cryptocurrencies means crafting a strategy for the long term. As you get more skilled in handling investments, you could try trading, which implies buying and selling crypto in a short time, but that’s considerably riskier.
So, starting with Ethereum investing, approach dollar-cost averaging (DCA), a method of sustaining long-term safety from volatility by periodically and consistently buying crypto in small portions (such as fractional shares). Considering that one Ether is the equivalent of 1,000,000,000,000,000,000 Wei, you can adapt the current prices and invest accordingly.
Another critical strategy is HODL (hold on for dear life), which means buying Ether and holding it for longer so that it gains value over time. The method is great for people prone to FOMO (fear of missing out) or FUD (fear, uncertainty, and doubt) because it offers a bit of stability in times of bearish market movements. Holding Ethereum brings considerable returns in the long run (months, years).
How to diversify with Ethereum
If you want to invest in Ethereum, you must also diversify your portfolio to lower volatility risks and spread opportunities. Diversification means tapping into different industries, asset classes, and use cases that add different values to the portfolio.
For example, Ether is backed by its blockchain, one of the fastest-developing technologies. Bitcoin, on the other hand, has the significant power of an almost established store of value. Investing in stablecoins ensures more stability since they’re pegged to the US dollar or other fiat currencies.
You could also invest by industry, meaning searching for crypto projects focused on various sectors. Axie Infinity belongs to gaming, Medicalchain supports patient data control, and Walton
Coin creates a unique supply management technology to eliminate fraud.
The easiest method of investing for a beginner is by risk level, especially in the first months. In this case, asset allocation could revolve around Bitcoin and Ether as large-cap cryptocurrencies and stablecoins. For the moment, maybe leave out meme coins and other altcoin projects.
Focus on future improvements
As a beginner, it may be difficult to track the safety and usability of a cryptocurrency project. However, you could follow one of the best signs of stability― innovation. Ethereum is continuously evolving, having established the roadmap, a plan to achieve maximum scalability, security and sustainability.
The roadmap has already checked the Merge and the Shanghai update, through which the network became faster and more scalable and allowed users to stake assets more efficiently. Yet, the upgrading goes further to the Surge, the update through which Ethereum might achieve 100,000 transactions per second. There are also more updates on the roadmap that will most likely expand over a span of about ten years.
Such commitment to change proves investors' trust and security, and you should invest in such projects because the chances of them flopping are pretty low. Crypto projects that lack vision for the future might not reach the same popularity or experience, so it’s best to ignore them, at least until you are more experienced.
What do you think about investing in Ethereum?
Ethereum is the second-largest cryptocurrency on the market. The Bitcoin white paper inspires its technology, but its creators focused on allowing people to create applications and technologies to contribute to crypto growth. This feature also pushed Ether to provide more value, making it a reliable investment. If you’re a beginner and want to start with Ether in your portfolio, balance the pros and cons and choose strategies like dollar-cost averaging to lower risks and increase the chances for profit.
