When is the best time to buy Bitcoin?
If you are interested in investing in Bitcoin but not sure when to take the plunge, this article will provide some insights into the various strategies that have emerged over the last decade of the cryptocurrency revolution.
Timing the market
Bitcoin has become infamous for its volatility, mostly because of how young and disruptive the market is. Cryptocurrency has proven to be a trickier investment to time and predict than more traditional assets like stocks or bonds. However, now that Bitcoin has a track record of over a decade, patterns have emerged that the market is becoming aware of.
These include patterns of recurring decreased trading volume, relative strength index (RSI) divergence and Bitcoin’s reliable slump during certain months. There is also increased volatility at the end of the week, with experts and savvy traders attempting to utilise these signals to strengthen their own trading and investment strategies.
Let’s just slow down a little…
Of course, those are all tools useful for timing the market, however you must first ask:
Are you trading Bitcoin or investing in it?
The old cliche goes: buy when it’s low and sell when it’s high (for traders, specifically). The strategy for buying when the price is low is called “buying the dip”, and this comes quite regularly with Bitcoin given its volatile nature. But what if it keeps dipping?
For a trader, knowing exact prices to buy and sell to receive short-to-medium-term gains (swing trading) matters a great deal. This is done is by strategies often developed from ‘technical analysis‘ that survey current market trends.
What if I just want to invest?
The general consensus is making a long term investment in Bitcoin is the best strategy for most individuals as long term investors can hold onto their assets for an extended period of time, without needing to constantly monitor the market.
Buy and Hold strategy
Known colloquially as the HODL strategy, Buy and Hold is the strategy of long term investing in the market. The intention is to capitalise on the asset’s long term appreciation, a strategy popularised by investment icons like Jack Bogle and Warren Buffet. In this strategy, your goal is long term growth over five years, ten years, twenty years or longer.
The reason why investors employ this strategy is that they believe that the price of Bitcoin will continue to increase. Despite the incredible fluctuations in Bitcoin value, the limited supply of Bitcoin means that the value will most likely continue to grow.
The ‘random day’ strategy
This is exactly what it sounds like. Investors utilising this strategy will invest all their money into Bitcoin on a random day. The problem with this strategy is that if the current value of Bitcoin is particularly expensive on the day the investor buys, they will have to sit in the market longer before they see a profit on their investment. It is not a popular strategy because the profit margin depends quite heavily on the value of the Bitcoin at the time of purchase.
The Dollar Cost Averaging (DCA) strategy is preferred by many Bitcoin investors as it decreases the risk of overpaying for Bitcoin due to fluctuations in prices. In this strategy, investors will buy a designated amount of Bitcoin periodically i.e once a month or once per week or daily, etc. This ensures that they increase their chances of buying Bitcoins at lower prices, instead of buying it all in bulk on one particular day. Depending on how much they have to spend, investors can employ this DCA strategy for months or even years.
If your goal is to buy and sit on your Bitcoin for years or even decades, DCA is a very effective strategy.
Is it too late to buy Bitcoin?
It is never too late to invest in Bitcoin. It is estimated that the last Bitcoin won’t be mined until February of 2140, which gives new investors plenty of time to get their foot in the door and buy Bitcoin.
This begs the question: what happens when all 21 million Bitcoin are mined?
Well, we don’t exactly know. As there will be less and less Bitcoin to mine, there will likely be a shift away from miners receiving Bitcoin as an incentive, and will instead the benefit will be receiving transaction fees.
While there is a level of unpredictability and volatility in the Bitcoin market (and the crypto market in general), there is still decades and decades of potential growth to take advantage of. There is plenty of evidence to suggest that early entry into the market is best, and nowadays buying Bitcoin only takes a couple of minutes!
So in short, the best time to buy is now.
Before you go rushing into trade, you need to identify your goals, which will point you towards the right strategy best suit for you.
Trading Bitcoin can be unpredictable, and that understanding the current trends and patterns still won’t guarantee success. By doing your own research and staying up-to-date in the crypto space, you can figure out the best strategies that suit you.