What Are the Biggest Mistakes You Can Make When Buying Ethereum?

Ethereum has grown into the world’s second-largest cryptocurrency by value and market capitalization, development primarily driven by technological advancements – e.g., the Metaverse and NFTs. The Ethereum price depends fundamentally on the supply and demand of the markets, but there are other factors that affect the sentiment of the market, like the domination of Bitcoin, Ethereum’s perception as a legacy coin, and the DeFi explosion. Maybe Ethereum won’t make you a millionaire in 2023, but you can certainly make profits by buying and selling cryptocurrency. If you’ve reached the conclusion there’s no better time than now to purchase Ethereum, please continue reading to discover the mistakes that first-time buyers make.   

Not Buying Via a Reputable Cryptocurrency Exchange

If you’re interested in buying Ethereum, select an online platform. A cryptocurrency exchange is suitable if you want to buy a small number of tokens, as you can acquire whatever fraction you want from the asset. It might come as a surprise to you, but you can purchase 0.001 part of Ethereum if you don’t have enough money in your account, so $10 allows you to buy some ETH. Not all cryptocurrency exchanges are created equal, even if they give you the tools to buy and sell digital assets, so be cautious. It’s recommended to use a reputable cryptocurrency exchange to purchase Ethereum because the platform has been in business for many years and is known for providing a high level of customer service. 

Not every option is a good one. If you have doubts about an online platform’s legitimacy, it’s best to move on because you won’t be able to move your coins out of the exchange after you buy them. When signing into a cryptocurrency exchange, search for the HTTPS tag, which confirms the website is who it says it is. A good exchange will always put security first by deploying a strong network and storing users’ funds in cold storage. Since you’re new to cryptocurrency, the best way to stay safe is to stick to trusted exchanges like Binance, where you can buy Ethereum with a credit card.  

Investing All Your Money in Ethereum

Similar to other cryptocurrencies, Ethereum is volatile, which means that it can quickly shift directions. You can lose money just as easily as you make it. Volatility can be healthy, with a steady increase or decrease in price, or it can be extreme when the price move in one direction or the other without notice. As you can see, putting all your money in Ethereum is a mistake. If you have your mind set on investing in Ethereum, allocate roughly 5% of your portfolio to cryptocurrency to reduce your risk exposure. Better yet, include multiple cryptocurrencies. Examples include but aren’t limited to Polygon, Cardano, VeChain, and Binance. 

Trying To Time the Market

Timing the market means moving investment money in or out of the market or switching funds between asset classes. It’s the opposite of the buy-and-hold strategy. Cryptocurrency markets are open 24/7, even during public holidays, so you can make purchases within certain windows to get the best possible Ethereum price. Nevertheless, the volatility of Ethereum makes it difficult, if not impossible, to identify reliable patterns and select trading positions accordingly. Tempting as it may be to wait for the price to drop before placing a buy order, you should look at it as a long-term investment. There’s no guarantee whatsoever that Ethereum’s price will go down. Actually, it’s more likely that the price will increase. 

Storing Your Tokens in A Hot Wallet

To store your Ethereum, you’ll need access to a cryptocurrency wallet, which keeps your tokens safe and accessible. As opposed to a normal wallet, a cryptocurrency wallet doesn’t hold coins – they live on the blockchain but can be accessed using a private key. The terms “hot” and “cold” are used to differentiate cryptocurrency wallets. A hot wallet is connected to the Internet, facilitating cryptocurrency transactions (you can store, send, and receive Ethereum). There have been many documented attacks aimed at such wallets, so you need to pay close attention from a security standpoint. If the hot wallet has security vulnerabilities, malicious actors can steal your private key and drain your account. 

As the name suggests, a cold wallet isn’t connected to the Internet, so it’s compromised. More often than not, it takes the shape of a USB drive and is password protected. If someone were to get hold of your cryptocurrency wallet and try to break your code, the security features of the device would lock them out following three attempts. Computer viruses are designed to attack software, which means your cold wallet is unaffected. Attention must be paid to the fact that threat actors can sometimes gain access to cold wallets, so take notice of all the possibilities. Regardless of your choice of wallet, keep your seed phrase safe. 

Not Keeping a Hard Copy of Your Seed Phrase

The seed phrase (sometimes referred to as the recovery phrase) is a random string of words that stores the necessary data to get access to your funds and your cryptocurrency wallet. So, in case you forgive your password, you can use the seed phrase to get back in. Of course, your seed phrase should be backed up in a safe location, accessible only by you. Keep a hard copy record – in other words, have it printed on paper. Even this can be compromised in certain situations, but it’s better than nothing. If you ever lose access to your Ethereum wallet, only the seed phrase can be used to generate the private key. 

Final Thoughts

All in all, Ethereum is preparing for the next upgrade, which will make the blockchain more scalable, scheduled for March. Validators will be able to withdraw ETH that’s been staked since as long as December 2020. It’s certainly not too late to acquire Ethereum, so if you’re a long-term investor hoping to get your hands on some tokens, it doesn’t matter at what price you’re buying. Some factors must be taken into account to ensure you get the most from your endeavors, so be sure to avoid the mistakes mentioned above.