Ether (or Ethereum), the world’s second-largest cryptocurrency, has been all the rage recently, generating quite the following and showing a significant increase in value. This recent attention has many people wanting to enter the Ether market and invest in Ethereum. However, since it is not a traditional currency, access to it could be restricted and it might present some dangers that do not occur with other financial assets. Fortunately, there’s a way to trade Ethereum without buying it. It’s called CFD trading and it offers several advantages over traditional ownership.
Cryptocurrencies can fluctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Your capital is at risk.
What is Ethereum?
Ethereum, is a blockchain-based platform which enables people around the world to to develop various online applications based on the technology. Since some applications require a payment method, Ether was created as the platform’s currency. However, with the popularity of Bitcoin and other similar cryptocurrencies, Ether soon took upon a life of its own and currency traders began buying and selling it for investment purposes.
How can I trade Ethereum?
Ether owners are divided into two groups: miners and purchasers. Those who purchased the currency either did it when it launched as part of a crowdfunding campaign or bought it from other owners. Miners are those who allocate some computing power in order to process Ether transactions, and are rewarded with fragments of the currency. However, Obtaining and owning Ether requires some tech skills and a digital wallet – which is why so many traders opt for the CFD option. When you trade Ether using CFD, you engage in a contract with a platform (such as eToro) in which you don’t actually own the currency, but rather enter an agreement at the end of which you settle the difference between yourselves. If prices went up between the time you opened and closed the position, you are get the profits, if they go down, the margin is deducted from your account.
What are the advantages of buying Ethereum via CFD?
- Liquidity: Ethereum is not a commonly used currency, therefore it is not always easy to sell. Moreover, some Ether transactions take time to process. With a CFD you can open and close positions almost instantaneously, since you don’t own the actual currency.
- A variety of trading options: Just like any other asset, when buying Ethereum on eToro, you can open a “sell” (short) position, which will generate a profit if the price of Ether goes down. You could also set Stop Loss and Take Profit orders, which will close the position if a certain profit or loss point is reached.
- Security: While the Ethereum platform is encrypted, it is still exposed to hackers. For example, in 2016, a hacker stole $50 million worth of Ether from the platform. When using in a CFD with eToro, your money is safe in the hands of a secure, regulated trading platform.
Should I invest in Ethereum?
Just like any other asset, there’s no one right answer. The market is unpredictable and sudden changes could create massive gains or losses in Ethereum price over a short period of time. While some say that Ether is “the next Bitcoin,” others show less faith in the relatively new cryptocurrency. However, it is definitely a highly volatile asset, changing on a daily basis. Therefore, those who can accurately predict the direction in which it is headed will make a profit.
Cryptocurrencies can fluctuate widely in prices and are therefore not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. Your capital is at risk.