How Do You Successfully Trade Ethereum?

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Ethereum, ETH for short, is one of the world’s largest cryptocurrencies, second only to Bitcoin in terms of market share. The transition to Ethereum 2.0 will be completed by the end of 2022. The second-largest coin is transitioning from the strenuous proof-of-work (PoW) system to the leaner proof-of-stake (PoS) system, which is more environmentally friendly. The upgrade will increase the speed, efficiency, and scalability of the Ethereum blockchain network. Not only will it process more transactions, but it will also eliminate bottlenecks. 

When you see ETH available to trade, you’ll be trading Ether, the cryptocurrency of the network. The decentralized computing platform deploys Ether to pay transaction fees. Ether is the ‘fuel’ for the apps on the Ethereum network. The best part about Ether is that there are no limits. 

There are lots of reasons why you might want to invest in Ethereum. ETH can be easily traded and exchanged for other digital currencies. A quick search will reveal a handful of stores and apps that allow paying with Ethereum. Not only can you protect your privacy, but you also enjoy low fees. ETH is one of the oldest blockchain platforms on the market, invented by then 21-year-old computer programmer Vitalik Buterin in 2015. Even those who aren’t familiar with blockchain are likely to have heard about Ethereum. 

If you’ve never traded Ethereum before, here are some tips to get started. 

Find A Cryptocurrency Exchange and Create an Account 

You can’t purchase cryptocurrency via a bank or online brokerage firm. Therefore, you’ll have to use a cryptocurrency exchange. Identify the best trading platform for your needs. There are several options to choose from. You can open an account with a cryptocurrency exchange such as Binance, which lets you view the actual Ethereum price without delay. It functions just like an online brokerage platform in the sense that you have all the tools you need to buy and sell digital currencies. You can engage in leveraged trading to maximize your profitability. 

A cryptocurrency exchange is more versatile, as it enables you to buy and sell niche tokens. You can withdraw your ETH tokens at any time. If it’s hard to create an account at a particular exchange, don’t panic. It’s an indication that the cryptocurrency exchange is particularly trustworthy. No matter what platform you choose, keep most of your digital assets in an offline storage service, such as a cold wallet. A cold wallet is immune to hacking. The funds are difficult, if not impossible, to steal. 

Understand What Drives the Price of Ethereum  

ETH can be traded at all hours of the day and night. A centralized exchange matches those who want to buy Ethereum at a certain price with those who want to sell it. The price of Ethereum depends mainly on the supply and demands of the markets. In a scenario where demand exceeds supply, the ETH price tends to rise. If there’s a reverse relationship (e.g., there’s a surplus in supply without the equivalent demand), the price of Ethereum goes down. To execute a successful trade, you have to be capable of interpreting charts and data, not to mention spot trends. 

Nonetheless, there are other factors that influence Ethereum’s price, such as the domination of bitcoin. Bitcoin exerts influence over the value of other cryptocurrencies. When there’s a rise in Bitcoin rates, a simultaneous high is also recorded on the Ethereum value. If the price of Bitcoin decreases, the exact opposite happens. It’s clear to see that such a dependence causes problems. When the price of Bitcoin sees a slump, it will lead to a crash in ETH price. 

Let’s not forget about the rise of non-fungible tokens (NFT) and the decentralized finance (DeFi) explosion. Most NFTs are part of the Ethereum blockchain. They contain assets like art. Anyone can sell an NFT and ask for whatever currency they want. An increasing number of trades will automatically impact the ETH price. Ethereum is the leading blockchain for DeFi. Many DeFi tokens are based on the Ethereum network, and their users pay the ETH gas fees. Any discussion on DeFi is incomplete without Ethereum. 

Determine Your Level of Risk 

Figure out the level of risk you’re willing to take. All investments carry some degree of risk, so you shouldn’t invest more than you can afford to lose. It’s possible and even recommended to mitigate risk. Fundamental and technical analysis are two methods of risk reduction. Fundamental analysis is carried out by using publicly available information about ETH to get a sense of its intrinsic value. Keep up with the news, understand the supply and demand, and follow the rules of economics. Technical analysis is all about crunching numbers. It involves analyzing price action data to predict future trends. 

Decide What’s The Best Trading Strategy for You 

As far as Ethereum trading is concerned, there are two strategies you can resort to. You can invest in Ethereum and then hold onto it, waiting for it to increase in value. If you don’t want to buy the entire ETH token or you don’t have enough money in your account, you can purchase fractions of Ether. The simplest way to buy fractional ETH is through an online exchange. Depending on when you decide to sell Ethereum, buyers may offer higher or lower prices. You may be selling ETH at a profit or loss, which will affect your portfolio and have big implications for your finances. 

You can also try day trading, where you bet on the price of Ethereum via derivatives like contracts for difference (CFDs). Proper money management is of the essence. If applied correctly, it should bring a significant ROI. Keep in mind that you don’t actually own the currency. You enter an agreement at the end of which you and the trading platform settle the differences between yourselves. If the ETH price went up when you opened and closed the position, you’d make a profit. You can find various ETH derivatives on brokerage and exchange sites. Besides CFDs, there are future and options. You can buy and sell immediately without having to go through elaborate procedures.

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The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.

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