The Definitive Beginners Guide to Ethereum Trading [2020 Revision]

Ethereum is one of the more beloved cryptocurrencies on the market, largely as a result of its intriguing backstory, huge ROI over the years, and being one of the first truly innovative cryptocurrencies following Bitcoin’s launch in 2008.

Depending on how you look at the markets today, you may feel that Ethereum is either cheap currently in comparison to where it might be in the near future, or expensive compared to where it was just a few short years ago.

But trading Ethereum is as profitable and popular as ever, and we’ve put together a short guide on Ethereum trading, which will run through platforms that traders can gain an edge while trading Ethereum, what it is, and a number of strategies and ways of making money with the world’s number 2 cryptocurrency.

What Actually is Ethereum?

Ethereum is the brainchild of renowned blockchain visionary, Vitalik Buterin, and is a project that was created by a handful of the most prominent figures in the world of cryptocurrency.

Ethereum’s wide number of use cases and proven track record for providing solutions to other cryptocurrency-based groups and individuals have seen it deliver one of the most outstanding ROI’s of all cryptocurrencies to ever be created — currently sitting at around 46,000% since the launch of Ethereum in 2015.

The project actually began though when Buterin proposed the idea in the Ethereum white paper in 2013, and then met with the other cofounders at the North American Bitcoin Conference in Miami in early 2014.

Other founders include well-known crypto-entrepreneurs and technologists such as Dr. Gavin Wood (who authored the Ethereum Yellow Paper), the founder of Cardano Charles Hoskinson, Joseph Lubin, Antony Di Iorio, Mihai Alisie and Amir Chetrit.

At the time that Ethereum was created, only Bitcoin really stood as a viable cryptocurrency in its own right, with anything else that had been created at the time essentially just being clones of Bitcoin.

Bitcoin served a purpose well — the transfer and storage of value. But Buterin saw that there was an opportunity to create a cryptocurrency that did more.

Ethereum was the first programmable cryptocurrency, being that it had its own programming language and a type of data structure known as smart contracts that would execute the code stored within them while running on the Ethereum blockchain itself.

This opened up a plethora of new possibilities for cryptocurrency, and as more people began to see the possibilities for it, Ethereum’s price sky-rocketed.

What is it That Gives Ethereum its Value?

Ethereum allows users to create smart contracts using an inbuilt programming language called Solidity.

These smart contracts will run outside of any one single server and will be copied to all Ethereum nodes around the world and be publicly available to anyone that would like to see how they function.

This allowed for the creation of three new types of entities which are really the reason that Ethereum gained the success that it did — and they are DAO’s or “Decentralized Autonomous Organizations”, DApps or “Decentralized Applications”, and ICO’s or “Initial Coin Offerings”.

DAO’s

DAO’s are organizations that can be similar to a company, but that have their governance completely managed by algorithms built into smart contracts.

For example, a company might normally complete their hiring process by interview a large number of candidates physically, and then having them sign a contract of employment, and then adding them to the roster in HR.

A DAO could hold a list of positions that need to be filled at all times, and then if any positions are not filled in the organization, send out a message to a hiring agency to find the certain type of person needed, and once that agency had found the best candidate a message can be sent back to the DAO contract where they are automatically added to the roster stored within the contract in the Ethereum blockchain.

From there, instructions can automatically be sent out to the new recruit, and any work they complete can be managed and recorded within the DAO contract.

DApps

Decentralized applications haven’t seen as much success as many thought they would — many because of the complexity and cost of using the Ethereum blockchain to store large amounts of data that are normally required for apps to run.

There have been some high profile DApps that have found widespread success, such as Crypto Kitties and others.

ICOs

Initial Coin Offerings really drove the huge spike in the value of Ethereum, and this has been by far the most successful use-case of Ethereum to date.

Quite early on in the life cycle of Ethereum, people realized that creating a new cryptocurrency using Ethereum is exponentially easier than doing so from scratch using a language like C++.

And so prior to Ethereum there were a few dozen cryptocurrencies that were all fairly homogenous. Within 18 months of the launch of the Ethereum blockchain, an event called the ICO Boom was in full swing, with hundreds of new cryptocurrencies being created every month.

At one point the total amount of all funding coming into ICOs was larger than all funding going to venture capital projects by a large margin, and some of the more successful ICOs raised hundreds of millions of dollars, with EOS raised over $4 billion dollars over the course of a year.

Which Ethereum Trading Platforms Provide An Edge?

PrimeXBT: Margin Trading Ethereum with up to 100x Leverage

PrimeXBT is the world’s largest multi-asset margin trading platform by daily trade volume which sits at around $400 million per day on average.

The platform specializes in providing high-end margin trading services for retail and institutional investors and provides shorting and up to 100x leverage on all crypto-assets including BTC, ETH, LTC, EOS and XRP, as well as leveraging of up to 500x on all traditional assets including forex pairs, stock indices, commodities, and metals.

PrimeXBT’s powerful and reliable trading engine can execute over 12,000 trades per second, and the platforms user interface and charting technologies are intuitive to use.

While there is the possibility to leverage Bitcoin on a number of platforms, as well as the ability to leverage cryptocurrencies at low rates like 3x — 5x on various other trading platforms, PrimeXBT is the only platform for Ethereum traders to be able to secure leverage of up to 100x on Ethereum.

Paired with this is the lack of KYC requirements on the platform, with registration taking only 30 seconds and requiring just an email address, as well as PrimeXBT having fees that are up to 10 times lower than many other platforms.

Binance: Trading Ethereum Against a Wide Range of Pairs

Binance has grown to list a sizeable number of crypto-assets on the platform, and Ethereum traders can take advantage of the ability to buy and sell Ethereum against other crypto-assets.

The platform has a clean interface, and the ability to buy and sell their own native token — BNB.

Traders can trade Ethereum against assets such as XRP, BTC, EOS and LTC, and can use leveraging of up to 3x at the same time. This should be one area that Binance focused on improving though because low leverages of just 3x are not a popular choice with traders.

Binance’s fees are quite expensive in comparison to other platforms like PrimeXBT, however, BNB can be used to make trading somewhat less expensive, although it is important to understand that even with the discount in price trading is still not cheap here.

Binance continues to increase the number of assets listed on their platform, and as that number grows Ethereum traders will have more options available also in the future.

What Are The Best Ways To Trade Ethereum?

There are many ways to trade cryptocurrencies like Ethereum and although obvious favorites like buy low, sell high, and long term holding or “HODLing” are used by many traders, there is a spectrum of different strategies that can be used.

HODLing

HODLing is a popular catchphrase within cryptocurrency circles that means to buy an asset and hold it for a long time, no matter whether the price goes up or down.

Maybe surprisingly to many that are new to cryptocurrency, hodling has been historically one of the most successful strategies, although there are many other strategies that deliver higher returns for lower risk.

This is obviously the easiest strategy possible, however, so if you don’t mind waiting a year, or two, or three for a payoff and don’t want to learn about trading, this might make sense.

Margin Trading: Shorting, Leveraging

Margin trading is the use of borrowed money to create trades that are not normally available, and platforms such as PrimeXBT specialize in Ethereum margin trading, as well as margin trading for many other cryptocurrencies.

The two main types of margin trading are shorting and leveraging.

Shorting is the process of borrowing funds and selling them, then waiting for the price to be lower in order to rebuy at less than the original cost.

This strategy allows traders to profit from downward price actions, instead of always having to try to buy low and sell high.
Leveraging is borrowing funds and then creating trades that are much larger than normally available. You can leverage by 50x for example, and then for every $1 you would have normally made, you will now make $50.

Ethereum Algorithmic Trading

Algorithmic trading or “bot trading” is the process of programming computer programs to continuously run strategies of buying and selling cryptocurrency at different times, depending on the orders that you have given them.

While there is a need to understand trading and programming in languages like C++ or Python, bot trading can be extremely profitable, especially when strategies such as market making, arbitrage, and HFT are considered.

How Else To Make Money From Ethereum Without Trading?

Trading Ethereum isn’t the only way to make money with it — in fact, there are a number of different ways to make money that don’t require an understanding of trading at all.

Ethereum Mining

Ethereum is proof of work cryptocurrency, which means that thousands of computers are constantly trying to solve a puzzle which when solved by one of the computers provides them with a free amount of Ethereum.

These computers or “mining rigs” can be set up in a house with a cluster of GPUs being connected together, or can be more large scale with entire factories being turning into “mining farms” worth millions of dollars.

Ethereum Faucets

Ethereum faucets are websites that give out free Ethereum — sometimes for doing nothing, sometimes for completing a very small task like going to a website.

While no-one ever got rich from Ethereum faucets, they have a very low barrier to entry and you will actually get paid for what you do, even if it is only a few cents at a time.

Ethereum Bounties/Referral Programs

Bounties and referral programs can be found throughout the cryptocurrency world, with some programs such as PrimeXBT’s 4-tier referral program providing the potential to earn significant rewards by sharing details of the platform in social media and to friends.

Bounties are provided by many different projects, with Ethereum itself even having its own bounty program to find bugs in their system

What Does the Future Look Like for Ethereum?

Today Ethereum has become the 2nd largest cryptocurrency and is seen by some as the only other crypto-asset that has breached the mainstream apart from Bitcoin.

One of Ethereum’s main issues has been technical problems it had with scaling. When the ICO boom of 2016 came about, the Ethereum blockchain labored under the increased pressure and transaction times became so sluggish that many people began questioning if Ethereum could be a viable cryptocurrency in the future.

Since then until now, the project has expended a huge amount of effort redesigning their systems and fixing the scaling problems that have held them back.

Today Ethereum stands on the brink of releasing its new Ethereum 2.0 infrastructure which is touted to be able to scale and perform significantly better.

Ethereum’s all-time high price of over $1,000 is yet to be reached again, but what many are expecting is that if Ethereum 2.0 performs as it is meant to that it will open up such a wide range of new opportunities to use Ethereum that once again we will see a massive price explosion.

In Summary

Ethereum is here to say, and if anything the project is gaining strength year on year.

We’ve seen that there are a wide range of ways to generate profit with Ethereum, both inside trading platforms and elsewhere online.

The strategies available to traders are diverse, as are the number of platforms available to Ethereum traders.

However we’ve found two platforms that stand out because of the additional edge they give traders — one allows for shorting and leveraging of up to 100x on Ethereum, unique throughout the industry, and the other allows traders to trade Ethereum against many other cryptocurrencies.

While Ethereum’s past has been bright, its future seems to have the potential to even outshine what has come already — as Ethereum 2.0 may well be the catalyst that many have waited for before buying into the world’s number 2 cryptocurrency en masse.