Ethereum is one of the most volatile assets that can be traded on the market today. It is these extreme highs and lows that have attracted the attention of a ample number of day traders and investors, many of whom have discovered the chance to make unprecedented comebacks. Unlike many traditional assets, it is not uncommon for the Ethereum price to rally or crash by 5-10% in a matter of hours or days. Traders who are capable of buying and selling at the right time stand to profit exceedingly well from this asset class, but Ethereum trading is not for the faint of heart.
Platforms for trading Ethereum
Trading Ether can be done through the buying and selling of “coins” on an exchange, or through a “contract for difference” CFD on a trading platform. Both of these methods to trade Ethereum have their own advantages and disadvantages, many of which will be discussed in detail further below. The following list of Ethereum trading platforms will mark clearly whether they suggest buying and selling of Ether tokens, or if the trading is purely CFD based.
To begin trading Ethereum, select your country and register an account at one of the platforms or exchanges below.
Ethereum Trading Platforms
eToro is authorised and regulated by the UK’s Financial Conduct Authority (FCA)
eToro provides CFD trading which permits users to trade on the price of Ethereum without needing to purchase and secure the cryptoasset. eToro is a social investing platform available to traders in Europe. The company has placed an emphasis on cryptocurrency trading.
Plus500* is the world’s leading CFD trading platform for cryptocurrencies. Unluckily, Plus500 is not available to US residents. Your capital is at risk.
GDAX is a trading platform provided by Coinbase
What is Crypto Trading?
Crypto is brief for “cryptocurrency” and generally relates to a swathe of cryptographically-secured currencies. These currencies include Ethereum, Bitcoin, Monero and hundreds of others. The crypto trading market is much like forex, where currency pairs such as ETH/USD are bought and sold at an exchange or trading platform. Cryptocurrency pairs will have their price quoted in fiat or other cryptocurrencies (most commonly, Bitcoin). The price of Ethereum quoted in Bitcoin would be listed as the pair ETH/BTC. For simpleness, this example will look at US dollars as the quote currency.
Ann purchases Five Ether with US dollars. The pair ETH/USD is priced at $298.42 (the price of 1 Ethereum token). Assuming the exchange is very liquid (see Ethereum Liquidity), a seller of ETH/USD is found at the price and quantity that Ann has asked for. The transaction is finished almost instantly and Ann is now the proprietor of Five Ether at the price of $298.42 per ETH. Ann may then sell her Ether at a later date for profit, or she may choose to trade Ether for another cryptocurrency.
In summary, crypto trading is simply the buying and selling of cryptocurrencies with the aim of turning a profit. Traders familiar with the forex market will have no problem getting up to speed with cryptocurrencies, however some areas – particularly around decentralized exchanges discussed further below – are more nuanced.
Ethereum is the 2nd most widely traded cryptocurrency in the market behind Bitcoin. The 24hr volume of trades measured in USD typically reach into the hundreds of millions USD. The exchanges we have listed above are all very liquid for numerous pairs such as ETH/USD, ETH/BTC, ETH/EUR, ETH/JPY and many others. Trades for Ethereum are open and closed within seconds, and the liquidity of these markets is only enlargening as more investors and institutional money comes in the market. The only risk to liquidity is further intense transferred regulation as has been seen with the Chinese Bitcoin ban in September 2017. However, such overreach is unlikely to be made from governments in the USA and Europe. Those looking for reassurance about the liquidity of their Ether will be pleased to hear that a number of decentralized exchanges are now emerging. Whilst these exchanges are incompatible with fiat currencies like USD and EUR, they will permit unrestricted access to cryptocurrency pairs such as ETH/BTC and BTC/XRP.
For the time being, centralized exchanges like those listed above, provide a very liquid gateway into the world of Ethereum.
Is Ethereum Trading Worth It?
As with any high growth market, fresh investors feel that they are now “too late”, or that further growth – at least at the same degree – is unlikely. Ethereum trading carries with it substantial risk as the market is relatively fresh, but its computational blockchain has the potential to restructure financial, real-estate and gambling markets among others. There is some merit to the idea that one day Ethereum may become ubiquitous, whereby the brainy contracts which are developed on the Ethereum blockchain are necessary for corporations to remain competitive.
Day traders may not be interested in the long term fundamentals of the Ethereum blockchain, however the volatility of this market is enough for a successful day trader to become utterly wealthy in a very brief period of time. Those interested in the trading of Ethereum as a long term investment can rest assured in the fact that relatively very little institutional money has entered the market so far. It is also widely regarded that cryptocurrencies and blockchain based assets are here to stay, and whilst Ethereum may not come out on top, another cryptocurrency almost certainly will, by trading Ethereum today, it will then become clearer how to trade and speculate on other cryptocurrencies that may rival Ether in the future.
Ethereum CFD Trading vs Buying/Selling
There are two main forms of trading Ethereum and each have several key differences. These two forms of trading are CFD trading and buying/selling. When most people think of Ethereum trading, they imagine the purchase and sale of Ethereum tokens (ETH). However, with CFD trading, instead of actually purchasing the tokens for yourself, you purchase a contract which entitles you to the value of the purchased Ethereum. This means that you can buy and sell Ether without having to actually own the cryptocurrency itself. Instead, this type of trading can be analogized to “betting” on the value of the currency. However the differences go deeper than this:
This takes away the risk of theft and the time required to secure purchased tokens.
Rather than individuals trading with each other over an exchange, CFD trading platforms provide liquidity from institutional playmates. Buying and selling Ethereum CFDs is often instant.
In some jurisdictions, profits earned from CFD trading may be taxed more advantageously than buying and selling Ethereum directly.
Whilst it is possible to brief the market on some exchanges, CFD trading makes it very ordinary to setup a brief position.
When going long or brief on Ethereum, the trade will effectively incur a loss of the spread. This is the difference inbetween the buy (ask) and sell (bid) price, which varies inbetween markets. This can be as low 0.5% and as high as 5% of the total trade amount. A commission may also be charged on top of the spread.
As well as the cost of the spread, many Ethereum CFD trading platforms will also levee a fee on trades that are left open overnight. Trades which rollover for days can become costly, and for that reason many traders are incentivized towards higher risk brief term day trading.
Buy/Sell Ethereum Trading
Ownership of the asset grants access to other cryptocurrency-based trading services including decentralized exchanges, crypto to crypto exchanges like ShapeShift.io and portfolio managers such as Prism.exchange.
Those looking to buy Ethereum can set the price at which they wish to buy and will be matched to a willing seller. There is no spread and the fees are often placed (or weighted towards) the market taker.
Leaving Ethereum on an exchange does put the cryptocurrency at the risk of theft. A number of high profile exchanges have been hacked before and it is likely that more will be hacked in the future. Those wishing to withdraw Ether to their own secure wallet would need to invest time into understanding how to do so.
Centralized exchanges can be shut down by hostile governments. Whilst it is unlikely that funds would be lost, such a budge would cause enormous disruption. CFD trading would be unaffected.
This form of trading has not been mentioned until now due to its enormous risk. Binary trading is a form of price prediction which occurs over the very brief term – typically minutes. This type of trading is strenuously luck-based, and can be utterly difficult to win over the long term. Ethereum binary trading should be considered a form of gambling and used only for entertainment, much in the same way that someone may love the spin of a roulette wheel. If you are looking at trading Ethereum gravely, then we can only recommend that binary trading is avoided.
Trading Ethereum on Margin
Margin trading provides traders with access to borrowing in order to purchase larger volumes of Ether. The amount that can be borrowed – “initial margin” – is set by the brokerage and varies in size. For many traders, buying on margin can be utterly lucrative, however its risks are considerable. To stop traders borrowing too much, these margin accounts are limited with a “maintenance requirement”. This maintenance requirement stipulates the minimum amount that the trader must have in equity on their account.
For example, Bob deposits $Five,000 and borrows a further $Five,000 to purchase $Ten,000 worth of Ether. The maintenance requirement on his margin account is 25% (set by the brokerage), meaning that if the value of the purchased Ether drops to $8,000, Bob would need at least $Two,000 (25% of $8,000) in equity. In this case, Bob has a total equity of $Trio,000 ($Five,000 – $Two,000). If the price of Ether dropped enough such that Bob’s total equity was less than $Trio,000, the brokerage may issue a “margin call” and sell Bob’s Ether in order to bring the account back up to the maintenance requirement.
I’m not looking to trade, how do I buy and hold Ethereum?
The process of buying and holding Ethereum can be as ordinary or as sophisticated as you like. The complexities arise from the considerations that must be taken into account when securing the cryptocurrency yourself. In many cases, an investor may wish to leave their Ether in the palms of the exchange (ideally acceptable for petite amounts), in which case buying and holding Ethereum is very plain indeed. Total details can be found in our guide on how to buy Ethereum.
How risky is Ethereum trading
Cryptocurrencies are often referred to as “alternative investments”, that is to say they are high risk investments sat outside the mainstream audience. Alternative investments are typically set aside for sophisticated investors, however the lack of regulation in the cryptocurrency market opened this asset class to a much broader audience. Many alternative investors would recoil at the thought of investing in cryptocurrency largely due to its enormous volatility and this lack of regulation. Ethereum faces a range of risks that are discussed in some detail here: “What could demolish the price of Ethereum?“. The general consensus among blockchain/crypto traders is that Ethereum and other cryptocurrencies are either headed towards a valuation of $0.00, or a valuation that is extraordinarily higher than it is today. The question is how hurting the unavoidable bubbles will be, and whether – as a crypto trader – you are able to tummy the rollercoaster.
* Plus500UK Ltd is authorised and regulated by the Financial Conduct Authority (FRN 509909).
Plus500 CY LTD is authorised and regulated by the Cyprus Securities and Exchange Commission (License No. 250/14).
Plus500AU Pty Ltd, ACN 153 301 681, AFSL # 417727, issued by the Australian Securities and Investments Commission is authorized to issue these products to Australian residents. Derivatives issuer licence in Fresh Zealand, FSP #. 486026 authorises us to issue these products to Fresh Zealand residents. Plus500AU Pty Ltd, is also an authorized Financial Services Provider in South Africa, FSP 47546. You do not own or have any rights to the underlying assets. Please consider the Disclosure documents available on Plus500’s official websites.
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