How to Trade Ethereum – A Beginner’s Guide - Forex News by FX Leaders

How to Trade Ethereum – A Beginner’s Guide

Posted Monday, May 15, 2017 by
Eric Furstenberg • 3 min read

In January 2009, something happened that changed the financial world forever – the ‘genesis block’ of bitcoins was mined by an anonymous person (or persons) using the pseudonym Satoshi Nakamoto. That was it, the first decentralized cryptocurrency was created.

At the moment, bitcoin is still the world’s largest cryptocurrency with a market capitalization of more than $27 billion.

The Birth of Ethereum

In the meanwhile, an innovative young lad named Vitalik Buterin, through his ambition to completely transform the internet invented a platform on which developers could build any type of decentralized application.

Having a thorough understanding of Bitcoin, Vitalik suggested that it needed a scripting language for application development. When nobody was interested in his suggestion, he proceeded with his work on his powerful new project.

In 2013, Vitalik published a white paper describing this dynamic new platform which he called Ethereum. For his incredible innovation, he was named as the 2014 Thiel Fellow and received a $100,000 award.

After this, the young man dropped out of the University of Waterloo to pursue his Ethereum ambition. With the help of other developers and co-founders, the project was quickly shifted into overdrive.

With a very successful crowd sale in July 2014, they raised more than $18 million by selling ethereum, the Ethereum tokens which were basically the shares of the project.

How to Trade Ether 1

Bitcoin and ethereum, the world's largest virtual currencies.

Ether is also the Ethereum blockchain’s value token used to pay for transactions and computational services on its network.

A year later, their first release called Frontier was launched on July 30, 2015. A new platform was now available on which developers could create their own decentralized apps and smart contracts.

Today, ethereum is the second largest cryptocurrency in the world with a market capitalization of more than $8 billion. Let’s explore this interesting financial instrument which has grown an incredible 591% from 1 March to 6 May 2017.

How to Trade Ether 1Ether Daily Chart (Etoro)

The closing price on 28 February was $15.7305 and the price closed at $92.9766 on the 6th of May. Unbelievable!

How to Trade Ethereum

Ethereum can be traded on several cryptocurrency exchanges which include Poloniex, Kraken, Bitfinex, GDAX, and Gemini.

Then, of course, you can trade ethereum contracts for difference (CFDs) on the Etoro platform. Etoro offers a maximum 2X leverage on ethereum. There are other brokers and exchanges that offer more leverage, of course. Some of these firms offer as much as 33X leverage.

Some exchanges offer a variety of ethereum pairs which include not only ETH/USD (ether/U.S. dollar), but also ETH/BTC (ether/bitcoin), ETH/EUR (ether/euro), ETH/CAD (ethereum/Canadian dollar), and ETH/GBP (ethereum/pound).

Because of the volatility of ether, you shouldn’t trade it with much leverage. No leverage is the safest, of course. Until now, ‘buy and hold’ has been an excellent strategy. ‘Buying dips’ has also worked really well, although you would have missed out on a number of great opportunities if you only used this approach (on the daily timeframe, at least).

What Moves the Price of Ethereum?

Because ethereum is still a rather young cryptocurrency, its price is largely affected by events related to its development.

As mentioned earlier, ethereum is a value token which is used to pay for transactions and computational services on the Ethereum network. Consequently, the expansion of the Ethereum blockchain and related services will obviously impact the value and the price of ether.

A really important external factor that influences the demand for ethereum, is the price of its big brother, bitcoin. When money flows into bitcoin, ether and other cryptocurrencies usually benefit from it.

The reason for this correlation is because cryptocurrencies belong to the same market sector, so to speak. When the price of bitcoin increases, the general market perception is that the cryptocurrency market is ‘healthy’ and also a viable investment option.

Since ether is the second biggest cryptocurrency, it comes as no surprise that it is strongly affected by the bitcoin price and sentiment.

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About the author

Eric Furstenberg // Lead Educator
Eric Furstenberg is a successful entrepreneur and fund manager with years of trading experience in the Forex, commodity, and stock index markets. He is a seasoned trader who employs advanced trading methods to complement his portfolio and also manages a private investment fund.
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