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Is Ethereum a Good Investment?

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Ethereum is not a cryptocurrency — it’s a platform for creating decentralized products. Ether is the cryptocurrency that powers the Ethereum platform and blockchain. 

Ether has been competing with Bitcoin for the top spot since its release in 2015 and came close to overtaking it in February 2018. Both of these coins have hit new all-time highs since then, and there appears to be more room for both to grow in 2021. 

One thing is certain, the cryptocurrency market is much more volatile than the stock market. If you are particularly risk averse, this might not be the market for you. 

But if you’re a long-term investor who won’t lose sight over short-term losses, Ethereum may be a good investment for you.

Ethereum vs. Bitcoin

Bitcoin and Ethereum are completely different products. Bitcoin acts as a store of value, just like gold. Ether acts as a store of value too, but the Ethereum platform takes cryptocurrency to the next level. 

The Ethereum platform comes with it’s own programming language called Solidity that allows coders to write programs called “smart contracts.” Ethereum smart contracts have massive business and legal applications and represent the primary difference between the 2.

As far as which of the 2 is a better investment is impossible to say. It’s entirely possible that both Bitcoin and Ethereum will stand the test of time and coexist peacefully in the future. At the end of the day, your investment decisions must be made by you (or an investment advisor). 

The best thing you can do is to educate yourself as much as possible before risking any of your hard-earned money, and never invest money you aren’t willing to lose entirely. You don’t want to end up on the front page of Wall Street Bets, after all. 

Where to Invest in Ethereum

There are a handful of exchanges where you can purchase Ethereum. Jump to our guide on the Best Cryptocurrency Exchanges.

Best For
Crypto Trading
Overall Rating
Get started securely through eToro’s website
Best For
Crypto Trading
N/A
1 Minute Review

eToro, headquartered in Cyprus, England and Israel, has provided forex products and other CFD derivatives to retail clients since 2007. A major eToro plus is its social trading operations, including OpenBook, which allows new clients to copy trade the platform’s best performers. Its social trading features are top notch, but eToro loses points for its lack of tradable currency pairs and underwhelming research and customer service features

Best For
  • U.S.-based cryptocurrency traders
  • Social and copy traders
  • Simple user interface
  • Community engagement and following other traders
Pros
  • Expansive network of social trading features
  • Large client base for new traders to imitate
Cons
  • U.S. traders can only buy cryptocurrency
  • Only 15 cryptocurrency pairs available
Best For
New Investors
Overall Rating
try for free securely through Gemini Crypto’s website
Best For
New Investors
N/A
1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to 26 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For
  • New investors looking for a simple mobile and web app
  • Experienced investors who need a more advanced platform with more tools
  • Users looking for a 1-stop-shop to buy, sell and store all of their coins
Pros
  • Easy and quick signups — can get started in as little as a few minutes
  • Multitude of platforms to accommodate traders of all skill levels
  • Hot wallets include insurance to protect your from theft and hacking attempts
Cons
  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app
Best For
Crypto Investing
Overall Rating
Get started securely through Coinbase’s website
Best For
Crypto Investing
N/A
1 Minute Review

Coinbase is one of the Internet’s largest cryptocurrency trading platforms. From Bitcoin to Litecoin or Basic Attention Token to Chainlink, Coinbase makes it exceptionally simple to buy and sell major cryptocurrency pairs. 

You can even earn cryptocurrency rewards through Coinbase’s unique Coinbase Earn feature. More advanced traders will love the Coinbase Pro platform, which offers more order types and enhanced functionality.

Though Coinbase doesn’t offer the most affordable pricing or the lowest fees, its simple platform is easy enough for complete beginners to master in as little as a single trade.

Best For
  • New cryptocurrency traders
  • Cryptocurrency traders interested in major pairs
  • Cryptocurrency traders interested in a simple platform
Pros
  • Simple platform is easy to operate
  • Comprehensive mobile app mirrors desktop functionality
  • Coinbase Earn feature rewards you with crypto for learning about available coins
Cons
  • Higher fees than competitors
Best For
Instant exchanges
Overall Rating
get started securely through Changelly’s website

Advantages of Ethereum Investments

Ethereum is a speculative investment. Like any speculative investment, you might lose your money. 

The overwhelming performance of Ethereum has attracted traditional and institutional investors alike. Ethereum and other cryptocurrencies provide you with the following advantages over traditional investments:

  • Liquidity. Ethereum is arguably 1 of the most liquid investment assets due to the worldwide establishment of trading platforms, exchanges and online brokerages. You can easily trade Ethereum for cash or assets like gold instantly with incredibly low fees. The high liquidity associated with bitcoin makes it a great investment vessel if you’re looking for short-term profit. Digital currencies may also be a long-term investment due to their high market demand.
  • Lower inflation risk. Unlike world currencies — which are regulated by their governments — Ethereum has a transparent inflation plan and is subject to less risk. The blockchain system is infinite, and there’s no need to worry about your cryptos losing their value.
  • New opportunities. Ethereum and cryptocurrency trading is relatively young — new coins are becoming mainstream on a daily basis. This newness brings unpredictable swings in price and volatility, which may create opportunities for massive gains.

Disadvantages of Ethereum Investments

Ethereum may play a part in the future of monetary exchange and global computing systems, but it is equally important that you are aware of the concerns surrounding cryptocurrency investing. 

Risks associated with Ethereum investments:

  • Volatility. The price of cryptocurrencies are always changing. If you happened to buy Bitcoin on December 17, 2017, the price was $20,000. Weeks later, you couldn’t sell your investment for more than $7,051. To avoid huge loss, keep a close eye on the market.
  • Little or no regulation. The crypto market currently operates with no major regulations. It isn’t taxed and governments have no clear stance on it. As a result, you could stand exposed to fraud and malpractice.
  • New regulation. The government is unlikely to let cryptocurrencies remain unregulated for long. New regulations could interfere with business models, and cause crashes that are entirely out of your control
  • Threat of online hacking. Hacking is a threat facing cryptocurrency investors. Most exchanges let you buy and sell your cryptos using a mobile app or website. This leaves them susceptible to hacking and theft of all your investment. And cryptocurrency held on most exchanges isn’t insured by the FDIC.
  • Wallets can be lost. If your hard drive crashes or virus corrupts your wallet file, you lose your bitcoins. You can go from a wealthy to bankrupt investor within seconds with no way to recover.

What to Know Before Investing in Cryptocurrency

It’s wise to understand the fundamentals of cryptocurrency, the blockchain and Ethereum.  Checkout our educational resources here.

Unlike speculative stock investments, there are some additional storage risks to be aware of when investing in cryptocurrency specifically.

Cryptocurrency Wallets

Cryptocurrency wallets are a fundamental part of the ecosystem. Wallets give you the ability to easily send and receive money. 

Crypto wallets use a computer science concept called public key cryptography. Public key cryptography uses complex mathematical concepts behind prime numbers to secure data better than any cypher in history. All you need to know is that cryptocurrency wallets have 2 “keys”: 1 public key and 1 private key. 

Your public key is needed to send money to your wallet. Your public key is used to encrypt (or lock) any data sent your way. Data must be encrypted before being sent over the network for privacy reasons. 

As the name suggests, your private key must never be shared with anyone. This is because your private key can be used to decrypt, or unlock, any data that was locked by your public key.

Most wallets manage your private key for you. All you have to do is maintain access to your wallet. 

If you get logged out, you’ll need a recovery tool called a “seed phrase” to log back in. A seed phrase is a set of words, and most wallets will provide you with a seed phrase for recovery purposes when you create the wallet.

There are 2 types of wallets: digital and hardware. MetaMask and Coinbase Wallet are typically the best route to go for digital wallets, and the Ledger Nano X is the best hardware wallet.

If you lose access to your cryptocurrency wallet, whatever cryptocurrency was associated with the wallet is now lost forever. The best way to prevent this, is to handle your seed phrase with extreme care. 

A forgotten seed phrase can remove currency from circulation forever. A memorized seed phrase can carry billions of dollars across borders with 0 physical evidence. 

Now that you know how to keep your cryptocurrency safe, your biggest vulnerability is market volatility. Nothing can protect you from that. You will enter the cryptocurrency market with your own strategy and personal risk tolerance. 

Disclaimer: Do not take out a loan to invest in cryptocurrencies like Ethereum. Do not purchase them with credit. Do not do anything that could endanger you or jeopardize your financial future. If you aren’t sure how much risk you are capable of handling, consult a financial advisor who is trained for this.

Try Gemini

Gemini builds crypto products to help you buy, sell, and store your bitcoin and cryptocurrency. You can buy bitcoin and crypto instantly and access all the tools you need to understand the crypto market and start investing, all through one clear, attractive interface. Gemini Crypto Platform offers excellent account management options. You can manage your account at a glance, view your account balance 24-hour changes and percent changes. Get started with Gemini now.

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