Cryptocurrencies have been around for years, but they can still seem complicated, especially when it comes to incorporating them into your investment strategy. Despite the long existence of cryptocurrencies, the price of cryptocurrencies has skyrocketed since the 2024 presidential election, with the value of the cryptocurrency market exceeding $3 trillion as of December 2024. While you may not be using Ethereum to buy groceries yet, it's important not to overlook the cryptocurrency.
Important points
What is Ethereum?
Ethereum is a global software platform running on decentralized blockchain technology. The platform is open source, allowing developers to create and run applications (also known as DApps) for the public without government or corporate ownership. These apps are used for banking, gaming, social media, and more. The cryptocurrency used in Ethereum is called Ether (ETH).
What is an Ethereum ETF?
Ethereum ETF is an exchange-traded fund that invests in Ethereum. Some of these funds invest directly in Ethereum, while others invest in expected future Ethereum prices, similar to options trading. Like any other stock, ETFs can be bought and sold using regular trading apps and platforms. Ethereum is the second largest cryptocurrency in the world after Bitcoin.
What are the benefits of Ethereum ETF?
Instead of buying Ether itself, you can buy shares in this fund that invests in the value of Ethereum. You can add it to your existing investment portfolio without storing it in a separate account or digital wallet.
To use Ether and other types of cryptocurrencies, you need a special account or digital wallet. These are usually free to open, but there is a small fee for each transaction.
What I tell my clients
Cryptocurrency is still in its infancy. That's why I recommend to my clients that Ethereum only make up 5% or less of their overall portfolio. Since its founding in 2014, Ethereum has experienced all kinds of ups and downs. There was a split from the original, a change in the proof mechanism, and an upgrade to the blockchain. Although it is the second largest cryptocurrency in the world, there is still volatility and uncertainty surrounding it.
If you want to invest in cryptocurrencies but are concerned about risk, you can combine an Ethereum ETF with a Bitcoin ETF. Bitcoin is technically a cryptocurrency. Ethereum is more than just a cryptocurrency. This is a powerful platform for DApps, NFTs and other applications. By owning both, you can combine what the cryptocurrency space has to offer while increasing your diversification.
It's easy to get caught up in the hype and stress about missing out on the next big wave. Unless you work as a day trader, don't focus on daily price movements. Instead, focus on overall trends and trajectories. Investing is a marathon, not a sprint.
conclusion
Ethereum's future looks bright, but diversification is key to stabilizing a volatile investment. Ethereum ETFs allow you to own these new currencies while keeping your overall risk low. By focusing on long-term trends rather than short-term movements, you can arrive at a more stable investment approach while incorporating cryptocurrencies into your strategy.
