5 Reasons Not to Buy Ether

Ether is one of the most promising assets you can buy today. However, it’s entirely possible to buy the right assets for the wrong reasons.

Diagonal chain made of zeros and ones. Cryptocurrency and mining.

Image source: Getty Images

Ether is the second most popular cryptocurrency after Bitcoin and is the native currency of the most actively used blockchain, Ethereum.

There are tonnes of reasons why Ether could offer massive potential for investors. However, there are also many rationales to buy the asset that aren’t good reasons.

So, although the asset could be worth a buy, it’s entirely possible to buy the right asset for the wrong reasons. And just because you buy high-quality assets doesn’t mean you will automatically make money. It’s quite possible to speculate on even the best stocks and get burnt.

If an investor bought Shopify for short-term gains at the beginning of February for roughly $1,850 a share, they would be down at least 20% on their investment today. Shopify is still one of the best growth stocks to own long term. But anyone buying it hoping for a quick gain back in February has lost at least 20% over the last couple of months.

This shows that even if you buy the right stocks, you could still lose money if you’re buying for the wrong reasons.

So, with that in mind, although Ether is one of the top cryptocurrencies, here are five reasons why that shouldn’t be the main motivation to buy Ether, or any asset, for that matter.

Short-term gains

Investing for the short term is very challenging to do consistently. It’s entirely possible to get lucky a few times, especially in the bull run we’ve seen the last 14 months.

Investing for these gains consistently, though, through all cycles of the market is extremely challenging. This is why investors are advised to generally stick to assets that they can own for the long term. The Shopify example above demonstrates this perfectly.

The chart looks cheap

Charts serve a purpose, but they’re very limited. They offer a different perspective when you compare how the asset has performed fundamentally.

At the end of the day, though, it’s fundamentals that should be the primary reason for investment.

Don’t buy Ether if you don’t understand the technology

You shouldn’t buy Ether, or any asset, for that matter, without understanding why it has value. If we are talking about stocks, investors must understand its operations well to determine the value of the company and its potential long term.

For Ether and Ethereum, it’s crucial to understand why blockchain technology has been so popular and why it has so much potential going forward.

Don’t buy Ether if you can’t handle volatility

Similarly to not buying assets for short-term gains, you also have to be able to handle volatility if you’re committing to an investment for the long run.

Maybe you aren’t expecting short-term gains, but if your investments sell off majorly, you must be willing to hold for five or 10 years. Often, volatility is short term and has little impact on your investments in the long run. So, it’s crucial to decide if you can handle the volatility ahead of time.

You don’t have time to keep up to date with your investment

Lastly, you should never buy an asset if you don’t have time to follow its progress.

When you put your money to work in any investment, it’s crucial you keep up to date with all developments. Has the technology changed? Are there new competitors in the industry today that didn’t exist a year ago?

These are things to pay attention to that could influence your investment and how you feel about the asset long term.

Bottom line

Ether is a great long-term investment with tonnes of potential. That’s why I’d stick to a fund that offers you exposure directly to the price, such as The Ether Fund (TSX:QETH.U).

Buying stocks like The Ether Fund that do all the hard work for you for a small fee is ideal for investing in the booming cryptocurrency sector. Plus, it’s even eligible for registered accounts like a TFSA, unlike actually buying Ether yourself.

So, if you’re going to invest in Ether, I’d make sure you’re doing it for the right reasons. And I’d stick with a fund rather than a miner. Ether has enough potential as it is. Investors don’t need to take on the added risks of a miner.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Daniel Da Costa owns shares of The Ether Fund. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify and recommends the following options: short January 2023 $1160 calls on Shopify and long January 2023 $1140 calls on Shopify.

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