Buying Ethereum on Coinbase

There are many reasons to be excited about the digital currency Ethereum. For example:

  • it runs on a blockchain – the chief technical innovation behind bitcoin; good explanation here
  • its scripting language is a derivative of python, easy for developers to understand and pickup, in contrast with bitcoin’s arcane scripting language
  • it can process over 8 transactions per second, compared with bitcoin’s max of 3 per second
  • it allows for the programming of “smart contracts” – agreements that cannot be broken
  • it has a positive developer community behind it, and a strong leader in its creator Vitalik Buterin; bitcoin’s community, by contrast, has grown increasingly hostile, so much so that many consider it to be bitcoin’s biggest systematic risk; meanwhile, the identity of bitcoin’s creator(s), Satoshi Nakamoto, is unknown, and his disappearance in late 2010 has lead to a leadership vacuum within the community
  • it’s grown in value over 1000% (from $1 to $11) in the last 6 months, compared with bitcoin’s 75% growth (from $380 to $675) during the same period

Unlike bitcoin, however, ether (the individual unit of the Ethereum currency) is not quite so easy to buy. There are many apps for securely buying, selling, and storing bitcoin. They seamlessly link up to your bank account and/or credit card and allow you to buy bitcoin with the click of a button.

How can you do this with Ethereum?

Buying Ether with USD on Coinbase

Since many people already have Coinbase accounts, and trust Coinbase to store their digital currency, I’ll outline the steps you can take to buy ether through Coinbase with USD.

  1. Go to GDAX, Coinbase’s digital currency exchange
  2. Sign in with your Coinbase credentials, or create a new account. You’ll need to give them enough information to verify your identity. For example, expect to have to take a picture of your driver’s license and upload it. This will confirm your name and address information is legitimate. This only took a couple minutes.
  3. Once your identity has been confirmed, you’ll need to deposit funds from a bank account. If you haven’t already linked a savings/checking account through Coinbase, you’ll need to do that now. Here’s a step-by-step guide. This usually takes 3+ days, depending on your bank.
  4. Next, you should deposit funds from your bank account into your GDAX USD account for trading. To do this, you can follow the steps linked to above. This usually takes 5 full business days for me.
  5. Once your USD arrives, you’re ready to trade! Go here to get started. There are three different kinds of trades you can initiate: market, limit, and stop. This is a good explanation of how they work.

Off you go!

Instant Ether Purcahses on GDAX

The biggest downside of buying ether is the wait time. If the price is good, you don’t want to have to wait a full week before you can move. What I like to do is keep a reserve of bitcoin in my Coinbase wallet. Since you can move bitcoin instantly from a Coinbase wallet into a GDAX account, and since you can lock in the current bitcoin price on Coinbase when you purchase through an ACH transfer, you can do this:

  1. Decide you want to buy x amount of ether
  2. Calculate how much bitcoin you need to buy x ether, let’s say it’s y amount
  3. Confirm you have y bitcoin in your Coinbase wallet
  4. Initiate a purchase for y bitoin in Coinbase via ACH transfer
  5. Transfer y bitcoin from your Coinbase wallet into your GDAX account
  6. Trade y bitcoin for x ether on GDAX

Because you’re selling bitcoin at effectively the same price you just bought it at (assuming USD/BTC * BTC/ETH == USD/ETH), there’s no change in the amount of bitcoin you own. But you are able to lock in the good ether price immediately. Your bitcoin arrives a few days later when your ACH transfer has cleared.

This has been a good, low-risk way to trade ether instantly on Coinbase.

Conclusion

There aren’t nearly as many tools for buying ether as there are for buying bitcoin. But it still can be done fairly easily. Good luck!