Cryptocurrencies are becoming more and more popular. But when is the right time to buy? Here you will find tips and strategies for buying Bitcoin, Ether & Co.
The search for the right form of investment occupies every investor. And there is no universal answer. Because depending on your own investment horizon and your own risk tolerance, different concepts are conceivable.
However, it can be observed in recent years that more and more investors are also supplementing their portfolios with a certain proportion of cryptocurrencies. This is because they have yet another form of investment and can also benefit from the boom in cryptocurrencies.
Admittedly, the markets for cryptocurrencies are considered to be extremely volatile and it is not impossible that some currently very strong cryptocurrencies will become almost worthless in the future. However, since many institutional investors have also started to invest in cryptocurrencies, one can already anticipate certain stability here.
Buy the Dip | But When is the Best Time to Buy?
Again and again, people in the crypto community talk about buying the so-called dip. So as an investor, you wait until a crash or at least until a major correction and then invest your money.
That sounds like a very good strategy at first. Because this way you never buy at the highest price and can profit from an early recovery of the markets. Unfortunately, in practice it is not as simple as it sounds at first.
Because it can never really be determined in advance when the turning point is reached. So it may well be that one buys the dip and the market subsequently collapses again noticeably. Therefore, you should be very careful if you think you are buying the dip.
Nevertheless, there are some good strategies that have come out of this idea. For example, you can find yourself a value that you define as a price setback. For example, this can be a dip of 10%. As soon as a certain cryptocurrency collapses by 10%, you buy for a predefined amount.
And if there is then another slump of 10%, then oneself, or with the help of a Bittrex trading bot, buys again for the respective sum. This strategy requires a relatively high cash quota to be able to follow it consistently.
But if you have this, then you can use it quite sensibly. However, with this strategy, you should make sure that you choose a broker with favorable conditions. Otherwise, regular purchases can cause high fees and reduce the return.
Cost Average Effect with Cryptocurrencies
Many investors use it to minimize risk and also hope for an increase in returns. However, in a market where investors assume long-term growth, the cost average effect leads to a lower calculated return.
Nevertheless, there are scenarios in which a strategy based on it makes sense. If you find yourself unable to time the market correctly, investing weekly, monthly, or quarterly can at least ensure that you are buying at an average price.
And if the price for a cryptocurrency like Bitcoin falls, then as an investor you automatically profit from it without having to meticulously track the market and look for exactly the right time to enter. So, it can make perfect sense to develop a one-time strategy or investment plan that is then followed quite automatically.
Time to Buy | Personal Factors Play an Important Role
When it comes to the right time to buy cryptocurrencies, personal factors also play an important role. After all, one must also be able to actually raise the desired investment oneself.
Those who may need to rely on the invested money in the coming months should perhaps wait a little longer. Often, the so-called FOMO, i.e. the fear of missing out on something, drives investors to make a hasty investment.
This is especially the case when the markets are once again on a high and it seems as if the prices can only develop in one direction. Then it is just inexperienced investors who invest their money. Because they are afraid of missing out on further price jumps.
Therefore, they invest in their preferred cryptocurrencies without having a precise plan for it. And once there are price drops, they quickly get nervous or possibly sell to avoid losing even more money. That means they realize the previous book-only losses.
But this is exactly the wrong approach. Because with this behavior pattern, people usually buy exactly the cryptocurrencies that are currently receiving an enormous amount of attention and are therefore rising in price. And when the hype is over, these hype-driven investors often sell at a loss.
This approach can be attributed to a lack of knowledge and experience. Because, of course, it is already foreseeable in advance that there can be sometimes considerable fluctuations, especially with smaller cryptocurrencies. And even larger currencies, such as Bitcoin or Ethereum, are by no means immune to sharp price losses.
After all, the past has shown that drastic price drops can also occur here from time to time. However, those who are convinced of a certain cryptocurrency should not be impressed by this. Because even if things don’t go so well for a while, that doesn’t mean that things can’t go up again.
So you should be prepared for the fact that there will be bad phases even for the most sought-after cryptocurrencies. And only if you can survive even these without needing the invested money or wanting to limit the losses, it is the right time to buy cryptocurrencies.
Buying During the Hype is Dangerous
Of course, it is tempting to buy a cryptocurrency that is the talk of the town. A recent example of this is the cryptocurrency, Cardano.
This has risen sharply in recent months, attracting more and more investors as a result. Because of course, you don’t want to miss out on such rapid growth and participate in it as well. However, if you look at the chart of Cardano, you will notice that Cardano had a similar movement once before in 2017.
Back then, the cryptocurrency surpassed the magic mark of one dollar before falling back into the cents range. Thus, those who bought during the hype at that time first had to accept sensitive losses. So one should be aware that buying in the hype can be associated with many risks.
In the meantime, however, Cardano has already clearly exceeded its all-time high. Whether Cardano will continue to rise can of course only be speculated. But with the right mindset, one can also consider a purchase in the current phase.
There’s No Perfect Time to Buy
Of course, you always want to buy at the absolute low and sell at the highest price. But unfortunately, this is usually not possible, because these prices always crystallize as maximum or minimum only in retrospect.
Therefore, there is also no one right time to buy. One should simply buy when one has the appropriate funds and considers the price to be good enough.
Because especially with a long-term investment horizon, time beats market timing in the market. By the way, these long-term investors in the crypto market are called Hodler – those who go through each dip calmly, waiting for it all to get back on track.