Cryptocurrencies now operate in the multibillion-dollar arena – with online platforms that allow you to easily buy and sell digital currencies. Although Bitcoin dominates the space, Ethereum is the second largest cryptocurrency in terms of market capitalization.
This means that Ethereum trading venues are home to a pile of liquidity and trading volume. Most importantly, you will have the choice to trade Ethereum against other cryptocurrencies such as Bitcoin or fiat currencies such as USD.
Want to know more about how Ehereum trading actually works? If so, welcome to read our Learn 2 Trade 2021 Ethereum Trading Guide.
What is Ethereum?
Launched in 2015, Ethereum is a blockchain project that allows users to send and receive value without the need for an independent partner. Instead, the core network is decentralized, meaning that it is not owned or controlled by a single person or entity. Ethereum blockchain is run by the parent cryptocurrency of the same name – otherwise called “ETH”.
Similar to Bitcoin, Ethereum has real value. That is, you can exchange your Ethereum tokens for fiat currencies like the US dollar or the British pound. As for keeping your ETH, it will need to be done in a private wallet – which you can install on your desktop or mobile device. This then allows you to send your Ethereum tokens to another user, with the transaction taking only 16 seconds.
Ethereum is also known for being the first blockchain project to bring ‘smart contracts’ to the cryptocurrency industry. This allows users to enter into agreements on a non-trusted basis. The basic smart contract operates on a strict, transparent code – so that neither party can change or cancel the agreement once it is implemented.
What are the advantages and disadvantages of Ethereum trading?
- Ethereum is still in its infancy – still a chance to enter the market at a good price
- You can trade Ethereum against other cryptocurrencies
- Ethereum can also be traded against fiat currencies such as USD and GBP
- Trade Ethereum leverage or sell it for a short time against fiat currency
- Crowds of Ethereum trading sites – some of which are regulated
- Get started easily with a debit / credit card or e-wallet
- Like all cryptocurrencies, Ethereum is a highly speculative asset class
- You could lose a lot of money if you don’t know what you’re doing
- Bitcoin has much more liquidity and trading volume than Ethereum
Ethereum Trading: The Basics
While the underlying technology that supports the Ethereum blockchain is no less revolutionary, the vast majority of people who buy ETH do so as a means of investing. In some cases, investors will buy Ethereum with a view to holding it for several years. This is with the hope that in the future they will be sold at a much higher price than they paid.
Given this, some investors prefer to participate in short-term trading in Ethereum. Here you will trade Ethereum against other currencies. This may be an alternative cryptocurrency like Bitcoin or Ripple or a real world currency like the US dollar. In any case, the overarching goal is to profit from exchange rate movements between two currencies – one of which is Ethereum.
Similar to forex trading, Ethereum trading is based on “pairs”. For example, trading BTC / ETH means speculating on the exchange rate between Bitcoin and Ethereum. Similarly, trading ETH / USD, you are speculating about the exchange rate between Ethereum and the US dollar.
For example, let’s say the price of ETH / USD is currently 213.45. This means that for every 1 Ethereum token you have a customer will pay $ 213.45. This course will run secondarily per second, so to make a profit you need to determine which way to go in the short term.
To do this, you will need to create a purchase order or a sales order.
How to place an Ethereum order?
No matter what assets you plan to trade with Etheruem, you will need to place an order with a network broker. As such, there are a number of indicators that need to be considered to ensure that the platform knows what you want to achieve.
Buy / Sell Order: First and foremost, you will need to specify whether you want to place a purchase order or a sales order. If you think that a currency pair will increase in value, opt for a purchase order. If you think the pair will decline, place a sales order.
Stake: Then you need to enter the total amount you want to risk in the trade. For example, if you want to trade $ 500 on a BTC / ETH purchase account, enter $ 500 in the appropriate field.