Ethereum is one of the most popular cryptocurrencies, behind only Bitcoin among the most highly valued digital currencies. Ethereum had a strong run in 2023, and kicked off 2024 with a bang as the potential for regulatory approval of Ethereum exchange-traded funds became clearer. While the cryptocurrency is still below its all-time high set in 2021, it remains a popular choice among traders looking to buy crypto.

For those looking to get in on the potential opportunity, here’s how to buy Ethereum.

What is Ethereum?

Ethereum (ETH) is a digital currency that can function as a means of payment, but it allows users to do many other things, including using self-executing smart contracts, creating digital apps and minting non-fungible tokens (NFTs). While it’s called a cryptocurrency, Ethereum may be more accurately thought of as a token that powers these various functions.

Ethereum debuted in 2015, and it operates on a decentralized network using a technology called blockchain. Blockchain is a kind of database that records every transaction in the digital currency, like a permanent record of every move made with the token. The decentralized network of computers verifies the transactions and ensures the integrity of the data.

It remains the second-most popular cryptocurrency, after Bitcoin.

How to buy Ethereum: Step-by-step guide

If you’re looking to buy Ethereum, you’ll need to work with a broker or cryptocurrency exchange that can help you place trades. Here’s how to get started buying Ethereum.

1. Find a crypto broker or exchange

The first step to purchasing Ethereum is to find a broker, app or exchange that can make the trade. The good news is that, because Ethereum is so popular, crypto exchanges, apps and many brokers will let you trade it. You may not even need to open a new account to do so.

If you’re thinking about buying Ethereum as a sideline to your regular investing, for example, you might want to go with Interactive Brokers or with a finance app such as Robinhood or Webull. You’ll get Ethereum and a whole range of other potential investments (stocks, ETFs, options and more), and won’t need a new account if you’re already a customer.

In fact, you can buy Ethereum using PayPal and Venmo, which may already be installed on your phone.

If you’re looking to expand into the crypto world, a crypto exchange can let you trade other kinds of crypto coins, though usually not other kinds of investments. Some of the best crypto exchanges let clients trade more than 100 kinds of crypto coins, including Ethereum, of course. Binance remains a popular exchange, and Coinbase offers one of the largest selections of cryptocurrencies.

Other issues to consider include:

  • Cost of trades. Some firms offer a flat fee, while others offer volume-based discounts. Other firms advertise commission-free trades, but mark up their cost with a built-in spread in the price of the cryptocurrency.
  • Safety. How safe is your exchange or broker? If you work with an exchange, find one that’s financially stable and reputable. In many cases, if the exchange goes bankrupt, it could take your coins with it, leaving you with nothing. (That’s not the case with a broker, where your assets are segregated and typically insured against bankruptcy, too.)
  • Custody. Are you looking to take custody of your crypto coins? If so, you’ll probably want to go with a crypto exchange. Most brokers don’t offer this functionality. If you work with an exchange (unlike with a broker), you can also typically store your coins in a crypto wallet.
  • Staking rewards. If you’re looking to earn staking rewards on your holdings, look for an exchange that offers the incentive to Ethereum investors. However, the Securities and Exchange Commission (SEC) has been cracking down on staking in the U.S., so be sure you understand an exchange’s staking program before you get started.

Those are some of the most prominent features, but find a partner that fits your needs. Bankrate has reviewed some of the top players for buying and selling cryptocurrency.

2. Set up your account

Once you’ve selected your broker or exchange, set up your account. You’ll need to provide some basic personal and financial information and answer a few questions. Generally, you can open an account in under 15 minutes and then have a look inside the platform. You may also need to verify your identity in one of a few ways, depending on the company.

3. Deposit money

Many companies allow you to deposit money as part of the account-opening process, or you can do so soon after. You’ll need to connect your bank account with your broker or crypto account and then can transfer the money. Money transferred from a bank through a traditional ACH deposit may take several days to arrive in your trading account.

If you’re working with a crypto exchange, you can often deposit funds using a debit card, albeit usually with a hefty charge. The money may arrive quickly, letting you start trading sooner than with a typical deposit from a bank. With a crypto exchange, you can also often deposit cryptocurrency in your account that can then be traded.

4. Place your trade

Once deposited money has cleared into your account, you’ll be able to buy Ethereum.  At brokers and exchanges you can buy Ethereum using dollars, of course. But if you’re working with exchanges that support crypto-to-crypto trades, you can buy crypto with other crypto that’s in your account. So you could trade Bitcoin for Ethereum, for example.

If you’re looking to take custody of your Ethereum holdings yourself and working with an exchange that offers it, you can now transfer them to your crypto wallet or you may continue to hold it with a wallet offered by the exchange. That said, taking custody of your assets yourself presents other risks, including being potentially locked out of your account.

If you’re using a broker, the broker will continue to hold your position.

Ethereum ETFs: An easier way to buy Ethereum

In late May, the SEC in principle approved spot Ethereum exchange-traded funds (ETFs) to trade, a significant step on the way to actually listing these ETFs on exchanges such as the New York Stock Exchange and Nasdaq. The SEC has yet to approve specific fund managers to issue Ethereum ETFs, however.

Ethereum ETFs would allow traders to buy and sell funds containing Ethereum, as traders do now with Bitcoin ETFs, following their approval in January 2024. Speculation on the futures market has driven the price of Ethereum markedly higher in anticipation of an approval, and Ethereum has soared since January after the emergence of Bitcoin ETFs on stock exchanges.

With the advent of Ethereum ETFs, traders could more easily access the cryptocurrency through a stock broker where they already have an account. A new Ethereum ETF would also likely make the crypto much cheaper to buy and sell, as the best Bitcoin ETFs have done for that coin. Moreover, these new ETFs put the burden of securing the cryptocurrency on the fund company, making it easier for traders to transact without the hassle and risks of a crypto exchange.

Is Ethereum a good investment?

Cryptocurrency, including Ethereum, is among the most risky of all assets. It’s important to understand what you’re investing in with crypto, since most cryptocurrencies (with the exception of stablecoins) are not backed by any assets or cash flow of an underlying business. That’s in sharp contrast to a stock, which is supported by the underlying company’s assets and cash flow.

Therefore, the price of cryptocurrency depends entirely on what other people will pay for it. If other speculators become more optimistic about its future, the price will rise. If they become more gloomy, the price will fall. It’s what experts call the “greater fool theory of investing.” And it’s one reason investing legend Warren Buffett won’t touch cryptocurrency.

So if you’re trading Ethereum or other cryptocurrencies, it’s important to understand what your investment relies on. Because of these risks, trade only with money that you’re prepared to lose.

Bottom line

Those looking to buy Ethereum have more options to do so than ever before, so it’s worthwhile to discover which broker or exchange works best for your needs. Since Ethereum is one of the most popular cryptocurrencies, traders can often buy it at a traditional broker and don’t need to open a specialty account to do so. Of course, it’s important to remember that cryptocurrency is incredibly risky and may not be suitable for all investors.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.