How to Buy Ethereum: A Complete Guide

Investing
Updated: 23rd Feb 2021
Written by Sean Graytok
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The altcoin market is booming, causing plenty of brand-new investors to wonder how to buy Ethereum. It is the most popular cryptocurrency after bitcoin. It has its own loyal following thanks to its innovative design and various use cases.

This article will discuss what makes Ethereum valuable and will help you decide if it deserves an allocation in your crypto portfolio.

Please consider reading our article on Ethereum and doing your own research before buying Vitalik’s Buterin’s currency.

Note that you can buy Ether on pretty much every crypto platform, but there are tradeoffs depending on where you go.

What is Ethereum?

Ethereum is a blockchain that hosts smart contracts and decentralized applications (dApps). It is a hub on which developers can create all sorts of programs and services that other investors can use.

We consider Ethereum not only a payments network but an ecosystem for other blockchain projects as well.

Users often call Ethereum ‘programmable money’ for its ability to write and execute digital contracts on the blockchain.

How to Buy Ethereum (Step-by-Step)

Step #1. Choose a Cryptocurrency Exchange

You will first need a platform on where you can exchange cryptocurrencies. Luckily for you, every exchange supports Ethereum, which means that you have lots of options to choose from.

Some of the best trading platforms include companies such as Coinbase, Gemini, and Kraken.

How do you choose a crypto exchange? Ease-of-use, security, and fees are some of the main factors to consider.

Ideally, the exchange will have a simple interface suitable for beginners. After all, how do you buy Ethereum if you cannot use the exchange?

We recommend visiting some of the platforms that we have previously mentioned. You can check out their trading interfaces without even registering.

After finding the right user interface for you, familiarize yourself with the platform’s fee structure. If you plan to trade frequently, you might want to pick an exchange with low fees.

Order fees can add up quickly if you’re not careful. If you’re not day-trading, then prioritize exchanges that have great security and customer support.

Step #2. Verify Your Account

Have you chosen an exchange? Your next step is to create and verify your account.

The crypto ecosystem is less regulated than the traditional finance space, so you can expect this step to be much easier, opening a brokerage account. However, when it comes to verifying an account, you should watch out for KYC.

KYC (Know-Your-Customer) is an identity verification process that the larger exchanges require.

You will need to provide your name, address, a picture, and sometimes more information depending on where you are from.

Note that verifications are fast and that once you complete them, you have finished creating an account.

Step #3. Fund Your Crypto Account

The next step is to fund your account because you will need U.S. dollars, or another digital asset, to buy Ethereum.

Prominent crypto exchanges often feature fiat gateways through which you can fund your account with USD. It is possible to add money by wiring it through a bank account or by using a debit or credit card.

Wire transfers usually take multiple business days, but debit purchases only take a few minutes. Fees generally have a ceiling of 2%, and all fiat funding methods require KYC.

Step #4. Buy Ethereum

Let’s say that you have funded your Gemini account by transferring USDT (Tether) from your preexisting crypto wallet.

Your next step should be to head over to Gemini’s trading section, look for the ETH/USDT trading pair and execute an order at the current market price.

You can also wait it out and keep your purchasing power in USDT if you’re uncomfortable with the current market conditions. Essentially, one can create a limit order and buy Ethereum when prices dip.

Step #5. Decide How to Store Your Ethereum

Where do you plan to store your newly bought Ethereum, and how? There are two options to choose from:

  • Hot Wallets: A type of software wallet located on a computer that is constantly connected to the internet.
  • Cold Wallets: A type of hardware wallet located on a physical device that is offline when not used.

After buying Ethereum, the exchange will act as the custodian and manage your assets. If you prefer to be your own custodian, you can withdraw your assets to a desktop or mobile hot wallet.

Alternatively, you can buy a hardware wallet like Trezor or Ledger and store ETH with much better protection.

Step #6. Transfer Ethereum to Your Wallet

Transfer Ethereum directly to your wallet by clicking ‘Withdraw.’ Withdrawals are usually processed in the section of a trading platform that contains data about your account’s holdings.

Copy your personal wallet’s ERC-20 address and input it into the exchange’s withdrawal field.

Then, finalize the transaction and confirm your identity by providing your phone’s 2FA code. It will take anywhere between 10 to 30 minutes for the network to confirm the transaction.

Best Places to Buy Ethereum

Are you unsure about which exchange to use? Here is a list of the four best places to buy Ethereum.

#1. Gemini

Gemini is a cryptocurrency exchange owned and operated by the famous Winklevoss brothers. It is the perfect spot for buying popular digital assets like Ethereum if you appreciate security and low fees.

Gemini is a company based in the U.S. that respects the highest levels of regulations and compliance in the state of New York. There has been no recorded hack on Gemini.

Learn More: Gemini Review

#2. BlockFi

Despite primarily focusing on crypto loans, BlockFi offers trading services as well. You can purchase and trade cryptocurrencies like Ethereum at competitive prices and start earning interest the moment your order has been completed.

Note that BlockFi is operated by Gemini and that it, as such, features similar security measures. However, one problem about BlockFi is that its list of offered crypto assets is incredibly small.

Unless you plan to forever stick with Ethereum, it would be wiser to pick another platform.

Learn More: BlockFi Review

#3. Coinbase

Coinbase is the second-largest cryptocurrency exchange in the market, highly reputable for its security and simple user interface. Coinbase has provided crypto services since 2012 and serves more than 43 million investors.

Like Gemini, Coinbase has never suffered a hack. But unlike Gemini, Coinbase’s fees are incredibly high and complex for both trading transactions and funding methods.

For trading, the exchange charges 0.5% on transactions for the first $10k of trading liquidity. The next tier (from $10k to $50k) charges 0.35%. In comparison, trading fees on other exchanges average around 0.1%.

Learn More: Coinbase Review

#4. eToro

Do you want to invest in both cryptocurrencies and socks at the same time? Then eToro is the perfect choice for you! They even have a special crypto exchange called eToroX, where you can buy real cryptocurrencies rather than their CFD equivalents.

However, there are two major problems. The minimum deposit amount is $200, and trading fees range anywhere from 0.75% to 3%, depending on what you are trading.

These are certainly higher fees in the crypto community, and there may be better options if you plan to trade regularly.

Learn More: eToro Review

Alternate Places to Buy and Invest in Ethereum

  • PayPal: the payment processor giant enables you to purchase cryptocurrencies directly from your main P.P. account. However, you do not actually own the crypto asset.
  • Robinhood: Another great example where you can seamlessly participate in both the stock and crypto markets. But just like with PayPal, you do not directly own or control your digital assets.
  • TradeStation: An brokerage platform on which you can trade up to 7 crypto CFDs.
  • Grayscale Trusts: A serious platform for institutional investors who invest in crypto-based funds
  • Blockchain ETFs: Another option for institutional investors. ETFs are priced based on the performance of multiple cryptocurrencies.

Learn More: Best FinTech Stocks

Can I mine Ethereum?

Instead of buying Ethereum, you can earn it by mining. Mining is a process in which the user runs a blockchain node that verifies transactions on the network. After verifying an entire block of transactions, the miner receives a reward in the network’s native cryptocurrency form.

Those that own high-end cryptocurrency can make hundreds of dollars per month by mining Ethereum. You can also contact crypto mining companies to rent ASIC machines to increase your mining capabilities.

Learn More: What is Bitcoin Halving?

Advantages of Buying Ethereum

  • Second-largest cryptocurrency
  • Represents one of the market’s best performers
  • The future Ethereum 2.0 upgrade creates a bullish narrative for investors
  • Developed by the brightest minds in the blockchain industry
  • Believed to be the next Bitcoin

Related: How to Invest in Bitcoin in the Stock Market

Disadvantages of Buying Ethereum

  • While there is room for growth, ETH has already ‘moved.’
  • The project is not yet scalable
  • Ethereum is a risky investment for the average investor

Related: Is Bitcoin a Good Investment?

Should you buy Ethereum?

There are many reasons why you should buy Ethereum. Many believe it to be the best crypto asset available. The future Proof of Stake (PoS) network upgrade will propel ETH to unprecedented highs.

Ethereum is the biggest hub for cryptocurrency projects, and it will continue to dominate the market in that respect.

Even if ETH development slows down in the near future, no other project can turn Ethereum obsolete or replace it.

Bottom Line: How to Buy Ethereum

Ethereum is a smart contract ecosystem built for processing payments and hosting decentralized blockchain applications.

It is the second biggest network in the entire industry, and many developers use Ethereum for creating their own projects.

Since it is so popular, Ethereum can be bought on all exchanges and trading platforms. It would be best to buy ETH in places like Gemini, Coinbase, Binance, and BlockFi.

However, we recommend that you better understand how fees work if you plan to actively trade Ether rather than make a one-time, buy and hold investment.

Naturally, the inherent volatility of crypto assets carries risks with itself, but there’s a good chance Ethereum will be around for a while given its network effect and the number of people that agree on its value.

Should you buy Ethereum? The answer to this question depends on your appetite for risk, investing goals, and whether or not you believe decentralized applications have a role in this world’s future.

More Crypto Investing Resources:

Sean Graytok
Sean Graytok
Sean is a lifelong student of the financial, media, and marketing industries. He is a Generation Z investing expert and is on a mission to empower investors to make the most of their money.