Well, for starters, you don't control your private keys if you leave your crypto on an exchange like Coinbase. Furthermore, there are a lot of reports of exchanges banning accounts without notification , and this could leave you trapped and unable to access your crypto. By moving your cryptocurrency, like Ethereum, to your own wallet, you have full control of your money. However, there is a big con - if you want to buy or sell more, you have an added step of either sending your ETH to an exchange to sell, or when you buy, you need to transfer it to your own wallet and there could be an associated fee or gas charge with the move.
It's up to you whether the added step is worth the security. Check out our list of recommended crypto wallets here.
Investing in Ethereum is risky, but it could potentially be lucrative. Unlike Bitcoin or Litecoin, companies are really using Ethereum as a building block - something more akin to diamonds than gold. As an investor, this is a potential win. Furthermore, there can be splits i.
This can be a good thing or bad thing. People who've invested in Bitcoin Cash are happy about the split because they made great money for no effort. You can learn more about him on the About Page , or on his personal site RobertFarrington.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He is also a regular contributor to Forbes. Other Options. Get Out Of Debt. How To Start. Extra Income. Build Wealth. Credit Tools. Table of Contents What Is Ethereum. What Is Ethereum Ethereum is basically software that is decentralized and allows developers and programmers to run the code of any application. Final Thoughts Investing in Ethereum is risky, but it could potentially be lucrative.
However, Ether is still an Internet currency, so you should always proceed with caution. Robert Farrington. Connect with. One warning: Some platforms allow you to buy cryptocurrency using a credit card. While that may seem tempting, credit card companies generally consider cryptocurrency purchases to be cash advances. ET, and the exchange is closed on weekends and certain holidays.
This is just like when you purchase a fractional share of a stock. After your purchase of Ethereum has been processed, you have to store your cryptocurrency. While some platforms will store it for you, some people opt to store their investments themselves to reduce the likelihood they will lose their crypto to a hack.
But if you want peace of mind surrounding your crypto, you can choose to move it to one of two types of third-party wallets:. To sell your Ethereum, simply head back to your crypto exchange and enter the amount you want to sell. Your profits from the sale are typically subject to capital gains taxes and can significantly affect how much you owe the IRS come tax time.
Ideally, you should have a large emergency fund, be maxing out your retirement accounts and have minimal debt. Kat Tretina is a freelance writer based in Orlando, FL. She specializes in helping people finance their education and manage debt. John Schmidt is the Assistant Assigning Editor for investing and retirement. Before joining Forbes Advisor, John was a senior writer at Acorns and editor at market research group Corporate Insight.
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Get Started. Some investors who want to trade multiple currencies or have the option to convert other currencies easily into Ethereum may want to consider the C2C exchanges more closely. A lot of investors also have multiple accounts with both a fiat exchange and a C2C exchange. Keep in mind that cryptocurrencies are highly unregulated with rapid innovation. A few key questions to ask when considering an exchange include: Where is the headquarters?
How secure is their website? How secure are your funds? Worldwide, Binance is the leading exchange by trading revenue. In the United States, Coinbase Exchange tops the list. The legality of cryptocurrency trading and trading in related products like crypto CFDs or futures may be limited by country or jurisdiction.
Once you have decided on a trading platform that fits your needs then the next step is to open an account. This process is similar to opening an account with a brokerage platform. You will need to provide your name, address, social security number, specified forms of identification, and more. Once you are confident with a site, the account opening process can usually be done pretty quickly. Verifying the account is usually the final step in the account opening process.
Most all exchanges will require that you verify your account in one or more ways. This is where you will likely need to upload documents to verify your identity and ensure that your account passes regulatory muster. Verification can take anywhere from approximately one hour to potentially a day or two depending on the exchange.
You'll next need to deposit currency into your account. For fiat currency platforms this can be relatively easy after verification of your payment information. Simply add money through your bank account or debit card on file.
Most exchanges have fees per trade so it can be best to trade large amounts at once. Depositing currency in C2C exchanges can be slightly more difficult. These exchanges require you to send cryptocurrency by code from one location to another. Ethereum is a popular depositing currency for many C2C platforms so holding large amounts of it can be beneficial. Code transfers take slightly longer to complete, typically up to an hour.
With a verified account and money deposited into that account, you'll be able to begin purchasing ethereum and other cryptocurrencies via the exchange. Each exchange has an interface that works somewhat differently, but be prepared to confirm transactions and then allow for processing time, which can also depend on the total number of transactions requested.
Once you have purchased ETH through the exchange, you can withdraw that currency into your bank account or a wallet that you control. Fiat exchanges make it easy to withdraw ETH by simply selling and sending the proceeds to your bank account. C2C platforms take a longer amount of time. On a C2C platform, you would need to code transfer your ETH to a fiat exchange and then sell to cash out. On all platforms, you also generally have the option to send ETH to a wallet.
Investing in cryptocurrencies and other Initial Coin Offerings "ICOs" is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs.
Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions.
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