Investing in Ethereum Without Buying It

Ethereum, the network that supports dapps, smart contracts and other crypto assets, has the potential to revolutionize many industries. The technology is also extremely volatile, so investors need to weigh the pros and cons carefully. The good news is that there are ways to gain exposure to this cryptocurrency without buying Ether directly. The best option depends on your investing goals, risk tolerance and how much you want to invest.

Ethereum is the second-largest cryptocurrency by market cap, so it’s available to buy through most exchanges and brokers that sell other digital currencies. Some online brokers and robo-advisors offer Ethereum ETFs that can be a simple way to add it to your portfolio. These funds can make it easy to diversify your exposure, since they’re backed by assets like stocks and bonds.

To buy Ethereum, you’ll need a wallet that’s connected to a crypto exchange or broker. Many centralized crypto exchanges offer wallets, and some online brokers allow you to store your Ethereum in a separate wallet on their platform. Some investors choose to take custody of their own Ethereum, but that can come with its own set of risks.

When choosing a wallet or exchange, consider the security features it offers. You’ll need a secure place to keep your private keys, which are what let you buy and sell Ethereum. A reputable digital wallet will protect your investments by making it difficult for hackers to steal your coins.

Once you have a wallet or account, you can buy Ethereum on most exchanges and through some stock brokers and payment apps that support crypto. For example, you can buy Ethereum through Coinbase or Gemini, and some stock brokers like Robinhood and Webull also sell it. Popular payment apps like PayPal and Venmo also carry Ethereum, and you can use them to buy things on dApps that support them.

The price of Ethereum is driven largely by demand for dapps, smart contracts and other blockchain applications. The technology can improve efficiency and reduce costs in a wide range of business operations, from facilitating transactions to running supply chain management systems. Dapps and smart contracts on Ethereum are also more secure than traditional contracts because they’re written in a language called “Ether.” This allows the code to validate itself automatically and prevents the types of errors that can occur when someone writes traditional legal code.

Investors should also consider how government regulation may affect the future of cryptocurrencies. For example, Securities and Exchange Commission Chair Gary Gensler has suggested that cryptocurrencies like Ethereum could be considered securities, which would subject them to SEC regulations. And the Commodity Futures Trading Commission has said that some cryptocurrencies, including Ethereum, are commodities and should be subject to CFTC regulation.

Ethereum is a risky investment, and you should only invest money that you can afford to lose. Talk to a financial advisor before investing in ether or any other crypto asset. And always diversify your portfolio with a mix of low-risk investments, such as stocks and bonds, along with more-volatile assets, like cryptocurrencies.