If you are planning to buy Ethereum (or already own ETH) then it would also be useful to know how best to sell the cryptocurrency.
While a large number of investors choose to buy and hold Ethereum over the long term, taking profit or rebalancing a portfolio as the asset increases in value is a great way to reduce risk and recover an original investment.
Selling Ethereum can be done at a multitude of online exchanges and our top 7 exchanges are listed below.
The ease at which Ethereum can be sold varies from exchange to exchange. We have rated our exchanges based on user experience, security and user feedback among other things.
Top 7 exchanges for selling ETH
If you are interested in “shorting Ethereum” then scroll further below to see a list of websites that make this available. You can also use the navigation menu above to jump ahead.
Selling Ethereum step-by-step
For those who take custody of their own ETH by using an Ethereum wallet, Ether must be transferred to an appropriate exchange in order to sell it.
These transfers are a simple process, and it is likely you have already made one before. A detailed guide to the basics of sending an ETH transaction. Alternatively, a quick refresher can be found below:
- At your chosen Ethereum exchange, find your Ethereum (ETH) wallet. Do not use a Bitcoin or non-Ethereum wallet as sending Ether to these addresses could result in permanently lost funds.
- Copy your Ethereum address; this starts with the characters “0x”.
- Go to the wallet where your Ethereum is stored and send your Ether to your exchange wallet using the copied address above.
- Once your transaction has received enough confirmations (1 confirmation every ~15 seconds and the number of confirmations required varies from exchange to exchange) you can trade your ETH for a fiat currency or another cryptocurrency.
Tips for Selling ETH
The method for selling Ethereum varies from exchange to exchange however the general process remains the same. If you are using a platform like Coinbase (recommended for beginners), liquidity is provided by the exchange and ETH sales are done directly between the seller and the platform.
Alternatively, if you are using an exchange marketplace like Kraken or Binance, then the sale of ETH is made between yourself and a matched peer(s).
Sale to an exchange
There are advantages to selling Ethereum directly to an exchange platform like Coinbase. Two of the key advantages are speed and simplicity; the platform will guarantee to purchase your Ethereum at a set rate. There will be a maximum amount of ETH that can be sold at any one time, however the order will be fulfilled immediately.
Adversely however, the exchange will often buy Ether at a less favorable rate, charging a small premium to cover the added risk of providing liquidity. Exchanges like these are also likely to cap the amount of Ether that can be sold in any single time period.
Sale on an marketplace
A marketplace simply connects willing buyers and sellers together. Buyers choose how much they are willing to pay for ETH (the “Bid” price) while sellers set a price at which they are willing to sell ETH (the “Ask” price).
The Ask price is always higher than the Bid and the difference between the two is known as the “spread”.
Sales on a marketplace have two key advantages over sales to an exchange platform: the price (both for buying and selling) is more favorable than the alternative and the amount that can be sold at any one time is far greater.
Exchange marketplaces are generally a better choice for more experienced Ethereum traders, however the key factor is “liquidity”. If a marketplace has low liquidity i.e. very little volume for a certain currency pair such as ETH/USD, then it may be difficult to sell significant quantities of ETH without incurring “price slippage”.
Marketplace sales can be difficult for certain currencies where volume/liquidity is low. For example, the cryptocurrency pair ETH/CAD is poorly catered for, often requiring users to sell ETH for USD (a highly liquid with lots of buyers and sellers) and then converting the received USD to GBP at the bank following a SEPA/SWIFT withdrawal.
To find the most liquid exchange for your chosen currency pair, see the Ethereum markets at CoinMarketCap.
Selling Ethereum on a marketplace is more complex than selling directly to a platform. When selling ETH the seller has two options for how they wish to sell. Either the seller creates the market (market maker) and specifies the price at which they are willing to sell, or they sell to an existing buyer who has listed a buy (Bid) price.
Market makers create a “limit order”, which specifies the lowest price that the seller is willing to sell Ethereum for. These markets are then matched with willing buyers. Alternatively – and more simply – a seller can sell using a “market order”, stating that they are willing to sell to the highest buyer on the market (market taker).
However, with a market order there is a danger that the seller may get an unfavorable price as their order is filled at any price available.
Sellers who act as a market maker are often rewarded with lower trading fees than market takers.
The ETH/USD market on Coinbase has 2 buyers, one who is willing to buy 5 ETH at $790 and another who is willing to buy 10 ETH at $780.
If a seller chooses to sell 8 ETH (using a market order), they will receive 5 ETH at $790 and the remaining 3 ETH at $780.
If however, they choose a limit order at the same price, then they would sell 5 ETH at $790 and the remaining 3 ETH would not be sold until a willing buyer joined the market. By creating a limit order, the seller guarantees the price at which their Ether will be sold.
Placing a market order in the example above may be acceptable for many sellers. However, consider an example where the seller wished to sell 10,000 ETH.
In this instance, the market would be liquidated at a lower and lower price, potentially selling some ETH tokens for just a few dollars.
This has been seen before – resulting in a “flash crash”.
Generally speaking, a seller will be better off selling using a limit order, however the mechanics of this should be understood properly before placing a sell order.
One disadvantage of a limit order is that the sale may take hours or days to be executed in full. If the price moves negatively, a limit order may need to be closed and reopened at the lower price. A market order will guarantee a fast sale on a highly liquid exchange and is often preferable for those willing to sacrifice profit in return for speed.
How to "short sell" Ethereum
“Shorting the market” is the act of selling an asset today and buying it back at a later date – for a lower price (subsequently making profit).
An Ethereum trader who chooses to short ETH/USD would benefit from the price of ETH/USD falling. For example, they would sell ETH/USD today for $700 and buy back later for $600. In this case, the possible upside of a short position is limited by the price of ETH/USD falling to $0. Note that the short seller does not actually own Ether, instead the cryptoasset is borrowed and thus creates a liability.
On the other hand, the potential downside of short selling ETH is unlimited. The price of ETH/USD may rise indefinitely creating limitless losses. For this reason, shorting Ethereum is very high risk and positions are typically opened and closed over the short term with stop-loss limits put in place (automatic closure of a position if losses exceed a user-specified amount).
Whilst very few people have dared to short Ethereum/Fiat currency pairs, some may choose to short ETH/BTC, expecting that the price of Bitcoin will outperform the price of Ethereum over a given period. Conversely, a trader may choose to short BTC/ETH – predicting that the opposite will occur.
Shorting a cryptocurrency can lead to losses that exceed the user’s deposit. For this reason, short traders often require a “margin account”. A margin account ensures that there are additional funds (a buffer) in the trader’s account which will cover losses if the position moves adversely.
If the margin account is not maintained (that is to say, if there is not enough of a buffer), then the position may be closed automatically by that platform. This is known as a “margin call”.
Ethereum can be shorted through 3 different avenues.
1. Regulated futures markets
CME Group and CBOE have begun trading Bitcoin futures and allow investors to short BTC/USD and other fiat currency pairs. It is anticipated that these same futures markets will be opened up to Ethereum, possibly as soon as the first half of 2020. At this point in time, selling or “shorting” Ethereum on these markets is not yet accessible.
2. Cryptocurrency exchanges
There are several cryptocurrency exchanges which allow users to open margin accounts. These exchanges will allow users to sell ETH/fiat and ETH/crypto pairs as well as many other non-Ethereum pairs.
3. Contracts For Difference (CFD)
One of the easiest ways that a trader can short Ethereum today is through a CFD broker.
These brokers allow users to essentially “bet” on the direction that the price of Ethereum will move. If the trader believes Ethereum will fall, then creating a “sell” order will reward the user if the price drops.
There are a few advantages to using CFDs; the first is that these markets are highly regulated. Second, the CFD platform acts as a custodian of funds. And finally, CFD brokers are often very simple to use, making them highly appealing to new traders.
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