How to Trade Ethereum in 2021
Everything you need to know about Ethereum and its coin, Ether (ETH).
First things first.
What is Ethereum exactly?
Ethereum is a digital platform that operates using the same blockchain technology as the cryptocurrency king, Bitcoin.
Etheruem went live in 2015 with an initial supply of 72 million Ether (ETH) coins at $2.77. Since then, the supply has increased to over 111 million coins, valued around $400 each (at the time of writing). That’s a return of over 14,000%, so it’s no wonder traders are becoming more and more interested in the profit opportunities arising from trading Ethereum.
How do I trade Ethereum?
When it comes to trading Ethereum, you have two options. One is to buy direct from an exchange (like you would buy fiat currency from a bank) and the other is to trade Contracts for Differences, or CFDs (like forex trading).
CryptoAltum offers CFD trading. Here’s just a few advantages of this type of trading:
1. Less Risk
CFD trading is based on price speculation only. You are essentially taking a bet whether the price will go up or down, and your profit/loss is the difference between the open price and the close price. This means you are not holding physical coins on an exchange, so you are not at risk of the exchange being hacked/taken down.
With CFDs you can go ‘Short’. This means if you think the price is going to fall you can place a sell order without having to own the currency first.
Pricing is aggregated from multiple exchanges, and only the top prices are passed to the trader, unlike an exchange where you are limited to their price, even if a different exchange has a better one.
While some exchanges offer some leverage it is generally low, usually around 1:20. CFDs are specialized leveraged products, allowing CryptoAltum to offer up to 1:500. This means you can control 500 times more than what you deposit.
So, now you’ve decided that CFDs are the best way to trade ETH, what's next?
First, and rather obviously, you’ll need a trading platform. This is where we come in. You can register for a trading account here.
Once you have a platform to trade on, next you need to decide which way the price is going to go.
Despite the dramatic overall increase in value since its launch, in between then and now Ethereum has also experienced some equally dramatic drops in value. Back in January 2018 Ether reached a whooping $1,424, only to fall steadily over the next 12 months to around $100.
‘Isn’t such a fall in value bad for investors?’ we hear you ask. Well, as we mentioned above, the beauty of CFD trading is that traders can profit from these huge drops too, by taking sell positions instead of buy. So, while people buying and holding on the exchange took the brunt of the damage, those shorting on CFD platforms like CryptoAltum hit the jackpot.
So how do I know which way the price is going to go?
First, you need to know what moves the ETH price.
Factors likely to increase the value of ETH:
1. Technical Upgrades
ETH2 is the long-awaited upgrade to the Ethereum Network and promises to deliver increased speeds and decreased costs of transactions. Expected delivery: December 2020.
2. Corporate backing
The Associated Press (AP) used the Ethereum Blockchain to publish results of the US 2020 Presidential Election. Huge adoptions like this stand to increase investor confidence and thus the price.
3. Market Growth
Massive global increase in popularity and interest in decentralised finance (DeFi) in general.
Factors likely to decrease the value of ETH:
Ethereum has famously been the subject of numerous hacks. Hacks lay bare the vulnerabilities in its code, causing investors to pull back and rethink the security of their investment.
The crypto space is insanely competitive and any advances with the existing competition, or newer projects such as Cardano (ADA) and Tron (TRX) are likely gain the attention of investors.
Secondly, you need to study the charts to identify patterns. This is called Technical Analysis, and while this can be a complex topic, we have simplified things for you with this Technical Analysis Cheat Sheet. You’re welcome.
One you’ve taken a look at the news and the ETH chart, it’s time to place your order, Buy or Sell.
Wait, what about the risks?
All investments carry some risk, so you do need to factor in some risk management. A common risk management strategy is to set a maximum loss of 10% of your account value, with a 2:1 profit ratio, meaning you’re happy to earn twice as much as you are willing to risk. For example, if you deposit $1,000, you may decide to risk $100, but take profit at $200. Note, this is not a recommendation of any kind. We always recommend traders practice on a demo account first (we offer a risk-free, no deposit required demo account).
So, that’s the basics covered.
To trade Ethereum you need a trading platform (of course!), a way to predict the price movement (fundamental and technical analysis) and lastly, a sound risk management plan.
Our verdict on trading Ethereum:
Ethereum has proved its stability as the 2nd largest cryptocurrency in terms of market cap.
For now, the future of ETH seems secure and scalable, with plenty of trading opportunities to be had.
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CryptoAltum does not accept any clients under the age of 18.