September 19, 2021
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cryptocurrency: when is the best time to invest in cryptocurrency?

By on August 9, 2021 0
Investments are about managing risk and maximizing gains. Over the past several decades, risk averse Indian investors have had the choice of choosing assets such as fixed deposits, gold, and even real estate for assured earnings. Higher risk assets involving equities, derivatives and other managed funds have remained exclusive to certain leading investors who have the means and knowledge to access these markets. Beating inflation with low risk assets alone is proving difficult in the post-pandemic world. Enter crypto-currencies, a new asset class with high potential, accessible and with risk management possibilities.

The global crypto market operates 24/7 with equal access to all investors without geographic or national bias. It is a ten-year-old nascent market with multiple growth potential over the next few years. More than a crore of Indians have already embraced cryptocurrencies with over 600% growth in cumulative investment over the past year, according to Chainalysis, a leading compliance provider.

For those who are ready to dip their toes into the world of cryptocurrency, discerning the best time to invest is essential. The crypto market is notoriously volatile with up to 30% price change in one day. However, risk management is possible and within everyone’s reach. We continue to advise investors to invest only a minor portion of the overall portfolio (up to 3%) in cryptocurrencies. Strategies vary depending on individual goals and risk appetite, but the following approach usually works, even for amateurs.

Build wealth over time

Building wealth is as much about patience as it is about timing of entry. Crypto assets cycle and compound over time. In the crypto world, long-term investors are more likely to get rich than short-term traders. Traders use technical analysis to predict a coin’s future trends based on its historical performance, trade volumes, and other metrics. These indicators, however, serve as a compass rather than a holy grail. Until the market reaches a particular maturity. For example, when a tweet from an influencer doesn’t stir up momentum, timing the market with short trades is usually detrimental. “Invest and forget” is a better strategy than worrying about everyday patterns.

The entry point

One proven method of managing entry points is to average dollar costs (DCA). DCA is a simple investment strategy that works regardless of an asset’s current price. Investors following the DCA divide the investment pool and buy assets at regular intervals. This strategy minimizes the risk of volatility as it would prevent a single price entry.

Timing of the trip

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. If the market enters a bearish phase (a period of falling prices), consider entering it again for future gains.

2021 is still early

Globally, there are approximately 120 million cryptocurrency investors in a world of 7.8 billion people. Adoption is growing rapidly, but there is potential for more. Compared to the global market capitalization of around $ 100,000 billion, the cryptocurrency market is valued at less than 2% today. So entering any day in 2021 will still be enough for most investors.

The only consideration for investing today is determining which cryptocurrencies will continue to exist five years from now. Bitcoin, Ethereum, and other large-cap coins have a higher probability of existence and are therefore relatively safer to begin with.

(Vikram Subburaj is CEO and Co-Founder, Giottus Cryptocurrency Exchange. The opinions are his)