Cryptocurrency traders breathed a sigh of relief Wednesday morning as prices for ethereum tokens — the second largest cryptocurrency after bitcoin in terms of market cap — finally started to level out. Before that, the tokens had lost 50% (about $17.5 billion) of their value after setting a record high near $400. On Tuesday, ether prices even briefly dipped below $200 per coin, according to Marketwatch. But as of 4:45 p.m. Eastern on Wednesday, ethereum tokens were back to trading at about $224 per coin, according to CoinMarketCap.
The rapid rise in the price of cryptocurrencies like bitcoin and ether in recent months has led to speculation that they are in a market bubble, much like that of stocks during the dot-com rush in the 1990s. It’s not clear why ether tokens recovered Wednesday morning, although sudden price fluctuations in the fledgling currency, created in 2013, are common: Ethereum tokens could be had for as little $8 at the start of the year, Bloomberg noted, but traded for more than $400 at one point in June.
Yet the July crash hasn’t diminished the enthusiasm of ethereum proponents, who argue that the cryptocurrency is more sophisticated and easier to build products around than bitcoin. It’s been used for everything from verifying aid to Syrian refugees to sharing data on driverless cars. As Mic noted in June, “Ethereum is a decentralized application platform that can change the way we do almost everything.” Ethereum developers are also in demand, Brendan Eich, the influential programmer who helped develop Java, said on Twitter.
The case for caution before buying ether
Of course, not everyone believes that cryptocurrency will be able to fulfill its promise as a more efficient, seamless, decentralized currency. In a Tuesday column for Marketwatch, Brett Arends called both major cryptocurrencies “complete garbage.”
“Cryptocurrencies ... have two actual applications: online gambling and money laundering. Neither is the heart of a major business model. But that’s it,” the columnist wrote. “Cybercurrencies may make online purchasing and international money transfers marginally more efficient in theory, if hardly in practice. Would you risk moving your money from dollars into bitcoins just to save a few percentage points in transaction fees?”
To be fair, this assessment is possibly a bit hyperbolic; cryptocurrency projects have long started to branch out of shadow-market money transfers. Blockchain, the underlying technology, has many potential applications. And there are currently ethereum-based projects exploring identity verification, intellectual property and music rights — even solar energy exchanges.
But Arends raises another problem with trying to speculate with a bet on Ethereum: There is starting to be a lot more crypto-competition, which is making picking winners more difficult than it already was.
How to buy ether
If you are still convinced Ethereum (or ripple, or litecoin) is the future, and you plan to buy and hold, it doesn’t hurt to invest at a moment when any asset’s price has fallen — though timing these dips properly is tough.
There are many ways to buy cryptocurrencies like ether and bitcoin, including, in some places, via ATM. People in some states can also use Gemini, and Coinbase is a popular tool to buy bitcoin, litecoin and ether. The best way to store cryptocurrency is by using something called a “wallet,” and several options (some described here) exist for those who want to buy ether tokens.
Finally, an alternate way to invest in cryptocurrency — if you are hoping to nab some at a moment when the price drops especially low — is to set up a buy order at a low price, so you can take advantage if values then bounce back.
Some traders use algorithms to place these kinds of options or limit orders — to buy or sell cryptocurrency automatically whenever it crosses that certain price threshold. Then again, that too, has its risks, since leaving your cryptocurrency with an intermediary, as opposed to in a secure wallet, can leave it vulnerable to hacking. And again, just like buying digital tokens in the first place, this is speculative behavior, so make sure you are using only your “fun” cash — that you can afford to lose.
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