As with other financial technology-related undertakings, investing in cryptocurrency can be daunting. It is extremely challenging to understand how this technology works. With it, an investor-only has a crypto wallet, and there’s no tangible proof of ownership to be had.

Still, one can’t simply ignore the promise of earning big in such a short time, and that’s how most people view cryptocurrency trading—an opportunity to get rich quick. For others, the fear of missing out may be driving more investments in this virtual currency, which, according to many, is poised to become the digital gold in the near future.

All forms of investments have risks attached to them, and cryptocurrency is no different. If you’re planning to diversify your portfolio, you may give cryptocurrency a try. The question is when is the best time to invest in it?

If you’re waiting for the right timing to earn exponentially from cryptocurrency trading, you’ll likely know when as the market is highly volatile. However, the good news is that long-time cryptocurrency investors have shared few indicators that could help point you in the right direction. These include the following:

Make Bitcoin Your Point Of Reference

As the first-ever developed type of cryptocurrency, Bitcoin has been leading the market for several years. A quick look at CoinMarketCap.com reveals that as of February 2, 2021, Bitcoin is priced a little over USD$31,100. The performance of altcoin, which refers to other cryptocurrencies aside from the leading currency, is closely tied to the latter. However, these virtual currencies work inversely.

The value of cryptocurrencies is greatly affected by market behavior. This means that once Bitcoin’s value goes up, traders who are keeping altcoins will likely sell them and transfer their investments to Bitcoin, pulling the altcoins’ prices down, and vice versa. This, however, remains widely speculative as cryptocurrencies are highly unpredictable. Whether planning to buy or sell, click here to have quick access to cryptocurrency trading.

Buy Low, Sell High

The golden rule among investors is to buy or invest when the price is low or when everyone else is selling, and hold your assets (digital or otherwise) until everyone else is buying so you get to sell them at a higher price. One method shared by crypto experts is referred to as averaging down. This involves buying in chunks for a certain period and observing the currency’s performance in the coming days. If it continues to dip, purchase a certain amount again and hold on to it, and wait until the price increases until you cash out.

Monitor And Analyze

If you want to be good at cryptocurrency trading, you need to study the movement of cryptocurrency prices and analyze the pattern. This can be challenging as trading cryptocurrency happens 24 hours a day and seven days a week. One thing to note, however, is that cryptocurrency is highly volatile, which means the value of Bitcoin and other cryptocurrencies can quickly fluctuate within the day.

Industry experts discovered that the demand for Bitcoin typically decreases on a Friday, picks up on a Saturday, and falls again on Sundays and Mondays. The theory behind this market behavior is that investors decide to buy as the week closes and then picks up again as the week starts, increasing the trading volume on Mondays as people get busy initiating buying and selling transactions.

This means you can either buy at the beginning of the week during an uptrend or sell at the end of the week during the downturn because you’ll likely get the best price. To make sure to keep your tabs on the prices, set a crypto notification to update you of the movements.

Bitcoin Prices Rely On Momentum

Economists Yukun Liu of the University of Rochester- Simon Business School and Alex Tsyvinski of Yale University-Cowles Foundation published a 2018 paper developing a technique to predict the price of Bitcoin. The researchers gathered and analyzed the seven-year performance of this major cryptocurrency and developed a system that can foresee how it will perform in the near future.

More importantly, the study revealed that, unlike traditional assets, cryptocurrency relies on momentum for its price performance. This means that once Bitcoin shows strong performance in the market, it will likely retain its standing in the short-term. A good indication is to invest if the major digital currency’s price increases by more than 20% in one week. While cryptocurrencies are considered these days as merely an investment, few individuals use this digital currency to purchase goods online from select online retailers.  Recently, a leading money transfer app has allowed cryptocurrency transactions. In addition, more companies are mulling to create their own cryptocurrency.

Bottom Line

It’s difficult to predict the best time to buy Bitcoin due to the market’s volatility, impacted by various factors, such as human and market behavior and inflation, among other factors. Being highly unpredictable, investors can earn and lose money at an astounding rate, and fast. However, the insights from cryptocurrency experts outlined in this article may be helpful for investors who are looking to make cryptocurrency a part of their portfolio.

Source: Plato