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Guide

How To Trade Ethereum [Full Comprehensive Guide]

Photo of Author Charlie Aikenhead
July 24, 2019
Charlie Aikenhead
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­­Intro To Ethereum & How To Trade Ethereum

Whether you’re already well-versed with Bitcoin or not, a whole new world will open up to you when you learn how to trade Ethereum. Why Ethereum specifically? Well, any cryptocurrency not named bitcoin is often referred to as an altcoin (short for alternative coin). Scroll through a list of cryptocurrencies right here on Bitbuy and you’ll see there are many different altcoins on many different blockchain networks, but most of the top altcoin projects live on Ethereum’s blockchain.

Where Bitcoin’s blockchain network is home to a single cryptocurrency and its use cases only to allow peer to peer exchanges of value with no intermediaries in between, Ethereum and other blockchains offer different use cases. Yes, they all offer users the opportunity to exchange value by trading tokens between one another, but their use cases foster innovation across many different segments of business and life.

Ethereum stands out from the crowd because it was the first cryptocurrency outside of Bitcoin to gain any real traction among early adopters and casual observers alike. Many of the blockchains that compete with Bitcoin and Ethereum for market share would not have launched had the leaders of the revolution not provided the inspiration and proof of concept required to even entertain such thoughts.

That’s why in this post I’m going to teach you how to trade Ethereum. There are many different ways to do so and we’ll explore them. But before we get into that, let’s go over a brief history of the project so that you can understand why it’s valuable and why trading ETH is a skill worth learning.

What is Ethereum?

If Bitcoin’s aim is to decentralize payment systems and take power away from the central authoritities that dominate the traditional banking system, Ethereum’s goal is to put innovation back into the hands of computer programmers and move it away from the large conglomerates that control our data and use it for financial gain without letting individual users reap the rewards themselves.

Ethereum’s long-term vision is to build the world’s first decentralized “supercomputer” if you will. It’s essentially a blockchain that allows developers to build decentralized applications. Not only can they offer these applications to individual users who can benefit from their functions, they can also raise money to fund upcoming projects. In the case of Ethereum, raising capital occurs through the collection of Ethereum tokens.

Perhaps the best way to explain it to you is to ask you to close your eyes for a moment and picture what big tech companies like Google and Apple do with applications. They promise developers a chance at getting exposure and traffic to their latest innovations and allow them to charge users a fee to download their apps. This sounds great in practice for the developer, but the downside is that Google and Apple allow endless numbers of other developers to sell similar apps, which means there’s lots of competition standing side by side. The two conglomerates also own all of the customer data that gets put through those apps. They then sell advertising to users and give them nothing in return outside of the ability to use the apps. These big companies also get to place limits on developers and the types of apps they can create and publish.

Ethereum puts the power of app development back into the hands of the developer (and not Google, Apple or Facebook) and allows users control over their personal data. This is why many projects built on the Ethereum blockchain focus on letting users maintain their privacy while using decentralized applications for their own benefit.

It’s incredible to think that this whole idea was launched by a young 21-year-old computer programming student named Vitalik Buterin in 2014. His vision not only sparked the altcoin revolution that came just a few years after Bitcoin launched, it also made a large number of people in the cryptocurrency space incredibly wealthy and helped to give birth to many competing projects that are aiming to revolutionize our future.

Consider for a moment that a project like NEO is considered to be the Chinese version of Ethereum, or the fact that projects like Tezos or Cardano are often referred to as leading the charge in the race to build “blockchain 3.0”. Cardano’s founder Charles Hoskinson is one of the cofounders of Ethereum and would never have launched Cardano if not for the lessons he had learned working alongside Buterin.

How to Buy Ethereum Tokens

Now that you have a bit of the background on the significance of the Ethereum blockchain, let’s dive into trading it. The first thing you’ll need to do is buy some ETH tokens. The easiest way to do that is by making instant purchase at Bitbuy.ca or Coinbase.com. Be wary of trying to buy when you hear big news and see the price spike up or down 30 or 40%. You won’t be able to buy that quickly even if your credit card has lots of room on it.

Regardless of which exchange you use, any exchange allowing you to buy cryptocurrency with your credit card is going to ask you to meet Know Your Client requirements. That means uploading identification and likely providing your full address and credit card details. It usually takes a few business days for your identity to be verified. This is especially true when cryptocurrencies are making headlines for big price increases and the customer service teams of these respective exchanges are responding to an influx of inquiries.

So in short if you are ready know you’re interested in buying cryptocurrencies and just waiting for the right time to get into the market, go through the KYC process now and you’ll be ready to buy when you the time is right.

Ethereum Wallets: How to Store ETH

If you’re into altcoins that don’t have as much market share as the top 10 or 20 cryptocurrencies for instance, it can often be difficult to find a secure wallet solution for your tokens. Fortunately for Ethereum enthusiasts, the ETH blockchain is the second most valuable in the world as has been the case for a long time. There are many ways you can go about storing your ether tokens. I’m going to list some of them below, but just keep in mind that no matter what the wallet provider promises in terms of security, maintaining control of your private keys and not sharing them with anybody else is the only way to truly be sure that your tokens don’t get stolen.

Hardware Wallets

There are many hardware wallets available for storing Bitcoin, Ethereum and other cryptocurrencies offline or in “cold storage”. Nano Ledger S and Trezor are by far the two most popular name brands in cryptocurrency hardware storage, but there are many others. The two devices basically look like USB keys. They allow you to set up a PIN number and 12-word verbal password that keeps your coins secure. Log into your key and use associated software platforms to send and receive tokens to other users or leave the key unplugged and save it for a rainy day. This is by far the most secure way to store tokens of any kind.

MyEtherWallet.com

MyEtherWallet.com essentially lets you create “paper wallets” that you can print off and store outside of a computer. You can also connect your hardware wallet to the site and use it as a viewer window to help you carry out transactions. Of all of the online methods I’ve ever used for trading or storing tokens, MyEtherWallet is by far the best. It’s also one of the few online solutions that’s not controlled by a greedy corporation, so you’re not paying fees to use the platform. MyEtherWallet is a free, open source tool.

MetaMask: A Browser Integrated Ether Wallet

Just like the heading says, MetaMask allows you to send and receive either tokens using your browser. I like to use the Google Chrome extension. With MetaMask, transferring value is safe and secure. You can also run decentralized applications through MetaMask and contribute to projects using the wallet.

Ever heard of the CryptoKitties craze people were both spending and making thousands of dollars trading collections of digital cats? How about ETHbots which tried to create the same kind of craze only with digital robots? Both of these projects allowed users to make purchases using MetaMask in a seamless fashion.

Other Ethereum Wallets

If you don’t like the idea of storing cryptocurrencies on a website and you don’t want to worry about taking care of a USB key, a desktop wallet might be the best option. Exodus is probably the most popular desktop wallet in the game. You can store Ethereum or any number of altcoins as well as good old-fashioned digital gold. Send and receive tokens, or just let them sit there and watch the value of your tokens go up and down as the market fluctuates.

Exodus is very convenient if you’re just holding your currency long-term, but if you intend to trade you’re going to store your tokens on exchanges (NOTE: Only while you’re trading. Never leave crypto online as a permanent solution.) When learning how to to trade ethereum, it’s important to have a plan of where to keep your ethereum tokens (ether) once you’ve finished.

Where to Exchange Ethereum

If you’re going to buy and sell Ethereum to try to make money, remember that day trading involves a significant amount of risk. It takes a tremendous amount of due diligence to learn how to analyze chart patterns and candlesticks and it’s not any easier than trading the stock market or any other asset online. What you do need to know about crypto exchanges however is that while many of the top ones resemble the setup of an online stock trading platform, there are other types that do not.

Exchanges that do just that include Binance, the most popular trading platform in the world. It offers an affiliate program that gives you a chunk of trading fees paid out by friends that you refer. Place buy or sell market or limit orders and get them filled quickly. Binance holds a large volume of Ethereum tokens which means your orders get filled quickly. However, the site is run in China and not as Canadian friendly as Bitbuy.ca. Other similar platforms include Bittrex, Kraken and Poloniex to name a few.

If you want to trade for Ethereum tokens or sell them but you don’t want to sign up for a complicated trading account that you don’t understand, using sites like Changelly or Shapeshift.io might be better. These websites allow you to select the cryptocurrency you have and the cryptocurrency you would like to trade for and swap them using a simple interface and only a single transaction. No need to create fancy market or limit orders using a confusing order book. The downside of this method however is that you can’t trade in large volumes and the website takes a larger fee just for making it easier for you. Both sites are great options for beginners who don’t want to deal with complicated interfaces and don’t want to have to provide identification to make a small trade.

Decentralized Ethereum Exchanges

Perhaps the greatest innovation to come out of the Ethereum blockchain project is the invention of the smart contract. Smart contracts allow users to exchange value between one another without a third party being involved. Over the last few years developers have found a way to leverage the power of smart contracts to create cryptocurrency exchanges where no central focal point of storage exists, making said exchanges hacker resistant.

It’s a little bit more complicated to make trades using this method, but it ensures that not even the most sophisticated hackers can steal the millions of dollars in crypto that get traded on these exchanges every day. Simply link your tokens to a smart contract using a plugin like MetaMask. Then either type in the values and the trade type you’d like to execute into the exchange site you’re using or simply click a trade value in the buy or sell order book and execute your trade.

EtherDelta is probably the best example of a decentralized Ethereum exchange platform. The fact it uses smart contracts to facilitate trade that isn’t the only benefit. While many of the best cryptocurrency projects built on the Ethereum blockchain are available on the industry’s largest exchanges, some smaller projects with a lot of potential are not. One that springs to my mind is KIK, a coin raising funds for its app by the same name. The app was the Canadian version of WhatsApp before WhatsApp was a thing.

The fact that the company is currently battling the Securities Exchange Commission on grounds that it offered consumers and initial coin offering illegally aside, the point is that learning how to use decentralized exchanges is a valuable skill in today’s cryptocurrency market. It’ll keep your tokens secure without having to buy a fancy hardware wallet, and you’ll be able to gain access to interesting projects that aren’t on major exchanges.

Now that you know a little bit more about how to trade Ethereum tokens, open an account at Bitbuy.ca and take advantage of the opportunities to get in on the revolution. Bitbuy.ca is Canada’s leading cryptocurrency exchange.


Photo of Author Charlie Aikenhead
Charlie Aikenhead
Charlie is a marketing and communications professional with experience in blockchain, and adtech startups. He currently serves as Director of Marketing at Bitbuy.
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