Disclaimer: This article is not supposed to provide financial advice. Digital assets such as Ethereum are risky. Be sure to do your own research and consult your financial advisor before investing. This article may contain information about digital assets owned by the author. This article has been originally written for StealthEX Blog
Looking for information on how to invest in Ethereum (ETH)? There’s good news! Your search ends here! This article will provide you with helpful tips for investing wisely in ETH. No matter your finance knowledge, you can invest in ETH safely and successfully if you have the right information. However, think twice before taking the plunge: ETH is speculative and not for the faint-hearted. As with any investment decision, you need to do your due diligence and weigh the risks and rewards thoroughly.
What Is Ethereum (ETH)?
There are a few basics that are essential to moving forward. The Ethereum protocol is a set of rules that govern a network of computers around the world. It serves as a platform for the creation and use of digital assets, communities, and applications.
On the other hand, Ether (ETH) is the second most valuable cryptocurrency based on market capitalization, and is the native cryptocurrency of the Ethereum network.
You should know the difference between Ethereum as a blockchain network and ETH as the cryptocurrency that runs on it. So, when we discuss ‘investing in Ethereum’, we mean the cryptocurrency, not the network.
The current number of active ETH addresses is 103,473,974, according to Coinmetrics
Following is a breakdown of these addresses’ balances:
How to Invest in ETH?
How to invest in Ethereum (ETH) is a question that has several possible answers. You can choose your preferred way in accordance with your goals and risk appetite.
- Buy ETH as a standalone asset
- Buy Ether-based tokens or derivatives
- Invest in Ethereum-based projects or stocks
- Lend ETH
How to Buy ETH?
It is possible to purchase Ether (ETH) on StealthEX. To buy Ether, choose the cryptocurrency you wish to exchange for it, enter the amount, and hit the “Start Exchange” button. Fill in your ETH wallet address and click Next. Check out this article if you need help creating an ETH wallet.
You will then need to send your deposit to the generated address. ETH will appear in your wallet as soon as the system detects your deposit.
As an alternative, here’s how to buy Ether (ETH) with fiat.
StealthEX’s Buy page. Choose which fiat currency you want to buy ETH with and how much you want to spend. The system will calculate the amount of Ether (ETH) you’ll get for your fiat. Then click Start Exchange.
After that, pick the fiat provider, paste your ETH wallet address and click Next.
Fill out the payment information to complete your purchase.
StealthEX requires no KYC for transactions under €700, or the equivalent in other currencies. It is possible to complete several smaller KYC-free transactions up to the €700 cap before the system detects that you’ve reached it.
Buy Ether-Based Tokens, Derivatives, or ETFs
Buy ETH Tokens
To get even more involved, you might want to consider buying assets indirectly related to Ether (ETH). According to CryptoSlate data, there are over 1,550 tokens based on the Ethereum network worth $243.51 billion combined, and their value is largely influenced by the value of ETH.
It is best to only consider crypto coins with significant market capitalization and a proven track record in this sector due to its volatility and infancy. Some of the most valuable crypto coins are DAI, Shiba Inu, Chainlink, Cronos, and Quant, which are also available on StealthEX.
Buy ETH Derivatives
Let’s get our terminology straight before we move forward. So, what are derivatives? In finance, derivatives are financial products whose value is derived from an underlying asset’s value. In the case of ETH, derivatives are investments that are linked to the price of ETH, such as options, futures, and perpetual contracts.
It is possible to buy them on various cryptocurrency exchanges or through CME, a traditional exchange.
For example, market participants held $6.08 billion worth of ETH futures contracts on crypto exchanges as of 26st July 2023, according to CoinGlass data. A term for this is open interest.
Buy ETH ETFs
Exchange-traded funds (ETFs) are similar in many ways to traditional stocks. By purchasing ETFs, you can invest in ETH without using a crypto exchange since they’re available through regulated brokerages and investment platforms, which gives your investment additional protection.
There are a wide range of ETH-based ETFs available; some hold actual Ethereum (ETH) coins, and others contain stocks of companies that are related to Ethereum. Management of ETFs is handled by ETF managers, making investing in ETH less tedious.
The top ETH asset management funds include:
1. Grayscale Ethereum Trust
Grayscale Ethereum Trust is a managed fund with $5.56B under management backed by Ether tokens (0.00965658 Ether per share). There is, however, a rather costly annual management fee of 2.5% and shareholders can’t exchange their shares for Ether, so price arbitrage is not possible.
2. Bitwise Ethereum Fund
Bitwise is the world’s biggest crypto index fund manager. It offers managed funds for multiple types of cryptocurrency, and one option is the Bitwise Ethereum Fund.
Investing in the fund is restricted to accredited investors with a minimum of $25,000 and an Expense Ratio of 1.5%, which includes management fees, custody charges for holding the fund’s assets charged by the custodian, and the fund administrator and auditor’s fees and expenses.
3. Staked ETH Trust
A first in the traditional investment space, the Staked ETH Trust allows shareholders to earn staking rewards while gaining exposure to Ethereum. With a minimum investment amount of $25,000 and a 1% expense ratio, it is available by private placement to accredited investors.
A major advantage of this fund is the simplicity of staking for investors, which is carried out by the fund administrator, while investors just invest in it by buying shares.
With a DeFi loan, you can lend your ETH to others in exchange for interest. This service has historically been extensively used by banks.
The blockchain technology allows anyone to become a lender, invest Ether through a smart contract, and earn a profit. The cryptocurrency decentralized finance system relies on smart contracts because they are self-executing and don’t require third parties to monitor them.
Even though DeFi lending platforms offer many advantages, you must stay on top of constantly changing crypto rules. Crypto legislation has recently caused heated debate among lawmakers, particularly in the United States, with regulators cracking down on DeFi lenders.
We have already explained what Proof-of-Stake consensus is. As a result of the latest upgrade, Ethereum has also transitioned to this model.
Validators, also known as “stakers,” are responsible for storing data, processing transactions and adding blocks to the Ethereum blockchain. As a reward for their active involvement in the network, validators receive interest on their staked coins.
The total amount of ETH staked as of this writing is 21,935,647, with a total of 689,569 validators and an annual percentage rate of 4.887%. Total staking rewards are 2,936.676119 ETH.
How to Stake ETH
- Solo home staking
The requirements for creating your own validator are 32 ETH, a computer that is connected to the internet 24 hours a day, 7 days a week, and technical know-how.
- Staking as a service
With staking-as-a-service options, you can delegate the hard part while earning native block rewards without having to deal with hardware. Typically, you keep the keys for withdrawing your ETH in your possession in order to limit counter-party risk.
- Pooled staking
When you don’t want or can’t stake 32 ETH, several pooling options are available.
These options include liquid staking, where you use an ERC-20 token to represent your staked Ethereum, letting you exit at any time, and keeping custody of your assets in your wallet.
There is no native pooled staking system on the Ethereum network. This is a third-party solution, and it carries its own risks.
- Centralized exchanges
If you’re not comfortable with holding Ethereum (ETH) in your own wallet, many centralized exchanges offer staking services. It is possible to earn some yield with them with minimal effort while holding ETH. However, in this case, you do not have access to the private key of the validator node, nor are you the custodian of your ETH.
Final Words on How to Invest in Ethereum (ETH)
In conclusion, there are a myriad of options when it comes to investing in Ethereum (ETH), ranging from purchasing Ether (ETH) coins to participating in staking programs. Each option has its own potential risks and rewards, so it’s important to know what to expect before making a decision. Ultimately, the choice boils down to each investor’s needs and preferences. In any case, investing in Ethereum (ETH) can be an excellent way to diversify your portfolio and benefit from this innovative technology.
