What is a Cryptocurrency?
It is a digital form of currency that can be used to purchase anything on the Internet. Most cryptocurrency is stored in a public distributed ledger called a blockchain, enabling anonymous transactions and ownership tracking. Because a blockchain does not require intermediaries like PayPal, it allows instant global payments to people around the world with virtually no fees extracted from the senders or recipients. Since it is essentially a currency, there are a few ways you can use it and profit from it such as investing in cryptocurrency mining or cryptocurrency trading.
How to Use Cryptocurrency Effectively?
When traders talk about a decentralized and open-source trading platform that functions on the blockchain, they often talk about Ethereum. For many years, there’s been the problem of trading with a third party (which was what Bitcoin used then). Ethereum was introduced to solve this problem, and it worked majorly on the blockchain. Blockchain technology not only made cryptocurrency transactions decentralized but also brought about transparency and reliability.
Ether is the foundational innovation that powers the Ethereum network, and it is the token used to reward users and traders. Every time Ethereum is purchased, an investment is made in the ether token.
The challenge for many traders in the cryptocurrency market is that they believe the only way to use Ethereum effectively is to buy and sell the coin. While that is one of the ways, it is not all there is to Ethereum.
Ethereum is not only a liquid investment; it also has a lower inflation risk when compared to traditional currencies and other cryptocurrencies. Traders can easily and quickly convert Ether to cash or other assets at a low price, depending on where the conversion occurs. The transparent inflation plan of Ethereum also makes it less prone to risk and creates better opportunities for massive gains.
To help you make the most of Ethereum, let us examine other ways to use Ethereum effectively.
1. Consider Mining
There is a fundamental concept that raises the question: What is cryptocurrency mining? The ether token is produced and made available to the cryptocurrency market through a process called mining. As a player who wants to invest in cryptocurrency, you can either buy Ethereum or mine Ethereum.
For those who want to engage in Ethereum mining and wonder how to mine cryptocurrency, you will need to solve complex computational problems which sometimes require a good guess. Every time a problem is solved, a block is added to the blockchain. The decentralized nature of the blockchain is possible by the addition of blocks.
To become an Ethereum miner, you will need sophisticated mining tools and massive energy. You can add more blocks on the Ethereum network in seconds, provided you can beat other miners who are competing to get the free tokens.
If you theoretically know how to mine cryptocurrency and have the technical knowledge to mine Ethereum, you should start Ethereum mining today and set yourself on the part of earning some Ether.
2. Consider Cryptocurrency Trading
Another way to use Ethereum effectively is to consider cryptocurrency trading. Cryptocurrency trading entails buying the coin when the market value is low and selling it when there is a surge in price. When doing this, you should bear in mind how volatile Ethereum is. Based on the market analysis, it is said that Ethereum is the second most volatile coin after Bitcoin.
The process of trading Ethereum is simple and starts with funding your account. Depending on your country or what works for you, you can fund your crypto wallet with fiat currency. Then, you can convert fiat currency in your wallet to Ether. When you discover there’s an increase in the price of Ether, you can convert it to other coins or sell to those who have an interest in it.
There are two generally accepted methods of cryptocurrency trading, specifically Ethereum: a long-term and short-term trade. For the long-term trade, you have to analyze different factors ranging from the current performance of the coin, the state of the market, and government regulations. A short-term trading strategy doesn’t require much stress as a long-term strategy. All you need is a knowledge of bearish and bullish patterns taking into consideration fundamental and technical analysis.
3. Buying and Holding
It is not every time you buy Ethereum that you will have to sell it. On some days, the best strategy will be to buy Ethereum and hold it. Those who hold Ethereum prefer a long-term strategy because there is no point holding on to it if there is no long-term plan in place.
Whenever you buy cryptocurrencies, the chances are that the Ethereum price will go down at some point and go up at others. Instead of getting emotional about your investment and selling it when it is low, you can hold on to it until its value rises.
To hold Ethereum for the long term, you will need an off-broker wallet. No doubt, you want your crypto to be secured while it is stored. As such, you need a reliable digital wallet to keep your Ether in. Fortunately, several of these digital wallets exist. What matters most is exercising care to ensure you choose the best wallet with less transaction fee.
In conclusion, it is not enough to have Ethereum stacked in your digital wallet; you need to know the best ways to use it effectively. You can choose to buy and hold your coins, trade them for other assets, or engage in Ethereum mining.
A dedicated Career Coach, Agile Trainer and certified Senior Portfolio and Project Management Professional and writer holding a bachelor’s degree in Structural Engineering and over 20 years of professional experience in Professional Development / Career Coaching, Portfolio/Program/Project Management, Construction Management, and Business Development. She is the Content Manager of ProjectCubicle.