A Guide to When to Invest in Bitcoin
The data suggests that it’s better to be a long-term investor than a short-term trader in this volatile market.
The author is the CEO and co-founder of Giottus Cryptocurrency Exchange.
You are a new crypto investor with capital you can afford to invest. You want to get started but you don’t know when is the best time to invest. Are you expecting a 20% price drop? Do you wait a week to see if the market moves in a particular direction? What is the standard practice for minimizing risk and maximizing returns? This guide is for you.
The crypto market is notoriously volatile with up to 20% price change in one day. While a “green” day, a day with an increase, keeps you exhilarated, a “red” day with a decrease can keep you awake all night. But, it doesn’t have to be that way. Risk and volatility management is possible and within your reach. All it takes is a little patience and a little diligence. Strategies vary based on individual goals and risk appetite, but the following approach works in most situations.
Even experts can’t time the market well
The data suggests that long-term investors are more likely to earn wealth than short-term traders, especially in the crypto world. While technical analysis of an asset acts like a compass and gives short-term guidance, it is never the holy grail. Over 90% of expert traders (who only invest for shorter periods of up to 3 months before switching assets) never recoup their losses and experience additional stress compared to even amateur investors (who invest for at least 2 years). The crypto market is always evolving and therefore is not immune to global news that can potentially affect it in the short term.
Building a long-term heritage
Building wealth is as much about patience as it is about timing of entry. Bitcoin follows cycles and compounds over time regardless of short- and medium-term bear phases (where the asset is losing value or not growing significantly). “Invest and forget” is definitely a better strategy than worrying about everyday patterns. This is valid even if an asset you invest in tanks 20% the next day. Patiently wait for it to recoup all losses. Bitcoin has consistently hit new record highs over time and therefore no investor has so far lost capital unless they sell it before they should.
Average your entry point for a better cost
One proven method of managing entry points is to average dollar costs (DCA). DCA is a simple investment strategy that works regardless of the price of an asset. This is similar to a Systemic Investment Plan (SIP) where investors divide the capital equally and buy assets at regular intervals. If you invest, say 5,000 INR per month, you can divide it into five portions of 1,000 INR each and invest every Monday morning at 10 am regardless of the market price. Mathematically, this gives you the best average cost over the month. This, of course, requires discipline and control, but it minimizes the risk of volatility as it would prevent a single price entry. If you want to take additional risks, you can probably allocate 80% of the capital to DCA and use the remaining 20% at your discretion. If the market is in a prolonged bearish phase, consider this an opportunity to allocate more capital to this month provided you can afford it.
One thing you should be timing in this market is your exit – while entry points provide opportunities for portfolio growth, exits are when profits are made. Every investor should be careful to withdraw their capital and some profit along the way once a particular price target is met in the future.
Today is still early
Globally, there are around 120 million cryptocurrency investors today. Analysts expect this metric to increase tenfold over the next five years, and as a result, the overall market is sure to rise in the long term. The best day to enter a crypto position is today regardless of the price of the asset. Bitcoin, Ethereum, and other large-cap coins have a higher likelihood of contributing to this growth and are therefore relatively safer to begin with.
Buy, Hold and Reap Years of Profit!
Disclaimer: This article was written by Giottus Cryptocurrency Exchange in a paid partnership with The News Minute. Investments in cryptoassets or cryptocurrency are subject to market risks such as volatility and have no guaranteed return. Please do your own research before investing and seek independent legal / financial advice if you are unsure about investments.