Ethereum takes its place next to Bitcoin in terms of market cap in cryptocurrencies. The digital asset is a decentralized and open-source network that is the prime choice of many traders worldwide. The cryptocurrency was first introduced in 2013 by a programmer known as Vitalik Buterin. Later in the upcoming two years, the network was developed with the help of crowdfunding and went live on July 30 2015.
How can you trade bitcoin?
Similar to other coins, Ethereum can be traded through a broker where traders can use different analysis techniques for price speculation. Traders can signup with a company and provider their complete credentials for trading.
Identity verification is also necessary in some cases. After opening an account, investors can deposit money and start trading Ethereum immediately.
Characteristics of Ethereum Trading
Ethereum trading is similar to trading other financial assets. Traders can speculate the instrument on both long and short sides. Let us go through a few vital characteristics of Ethereum.
Ethereum is available to trade 24 hours and 365 days a year. This can help investors who have limited free time on their hands to access the instrument at their wishing and trade it.
Volatility and liquidity
Ethereum is quite a liquid asset as it takes its place next to Bitcoin in terms of market cap. It generally follows the pattern of its big brother when it comes to price fluctuations. Almost all of the altcoins follow a similar pattern with Bitcoin when it comes to price action.
Image 1. The trading chart of bitcoin on the daily time frame. We will contrast it with Etherium to notice the price movement similarity.
Image 2. The trading chart of Ethereum on the daily time frame shows the similarity with Bitcoin. Traders can use price correlation techniques in their strategies to predict the future of cryptocurrencies.
Similar to bitcoin, Ethereum can also be mined using your computer hardware. Mining is the process of adding blocks of transactions in the blockchain of the coin network. By solving a cryptocurrency puzzle, a trader is awarded a portion of the cryptocurrency.
Some traders set up vast chunks of hardware for mining purposes. After going through the cost of electricity, they can earn a good amount of profit.
Ethereum Trading Strategies
Ethereum is under the portfolio of many investors who use price action, fundamentals, and algorithms for trading the market. Let us consider a trader who plots support and resistance lines on the ETHUSD chart to understand better. He also employs a 200-period moving average for identifying the correct trend to add to the confluence.
Image 3. The trader takes a buy position at the green arrow where the ETHUSD pair had previously shown a level of resistance. The demand zone and the 200 period moving average give a good point for making a purchase.
Some traders use algorithms to automate their trading strategies. Averaging is a common practice where investors buy successive portions of Etherium at regular intervals. When the market turns back in their favor, the positions are sold for a profit.
Advantages of Trading Ethereum
We can list a few benefits of Ethereum trading as follows:
- The instrument is available 24/7 for trading
- Ethereum mining is more profitable than other cryptocurrencies
- The asset is readily available on multiple brokers for trading
- Using algorithmic strategies can be beneficial on the pair due to varying volatility and abundance of volume
While some of the demerits can be stated as:
- There is no guarantee that the instrument will remain profitable in the long run
- The increased volatility in the asset can be damaging to some investors