A very important thing to remember before investing in crypto is its volatile nature. The price of your crypto asset, stable a moment ago, can fluctuate and reach a high or low in just a few minutes. Investors are always researching to predict the best time to buy cryptocurrencies.
However, to put it simply, given crypto volatility, there is no right time for buying a crypto coin. Investors work their way around this problem by following a few methods. You can follow them to time your investments and reap the best possible rewards.
Methods to time your crypto buying
Day Method
Crypto trading takes place throughout the day, 24/7, worldwide. You can analyse the price data of the asset you choose to invest in for a few months. This process will help you to detect patterns at which time of the day your targeted asset is at the lowest price.
You can time your buys accordingly and reap the benefits. You can also track the price graph of the crypto coins with the highest market caps. They generally have a similarity in their price rise and falls.
For example:
You are targeting to buy Ether and Cardano. So, for over a month, you can check their daily prices regularly. There are various mobile apps that you can use to do this. After you find a trend in their rise and fall, you can buy these assets at the time when they are at their lowest.
According to crypto trading data, early morning seems to be one of the best times of the day to buy most cryptos.
Week method
Like the day method, you can find out which day of the week your target crypto assets are at their lowest price so that you can buy them accordingly. Unlike the stock market, the crypto world is open 24/7. So may it be Saturday or Sunday, you can always analyse the price of your assets.
As per crypto trading data, it was seen that during October and November of 2021, six out of eight weeks saw a crypto dip on Thursdays. According to the data, the next day of the week is Monday. There have been five dips on Mondays among the eight weeks across the two mentioned months.
Month method
In this method, you must analyse the best time of the month to invest in your targeted assets. It can be a specific day or period when the price remains the lowest.
Research suggests that during the first ten days of the month, the price of cryptocurrency increases. A collapse follows this, and the prices reach their lowest in the second half of the month. Now, it is your task to determine the specific days on which the price remains the lowest for a particular crypto and invest accordingly.
One thing to remember is that this method will vary from one crypto asset to another. New or small altcoins may show a different trend altogether. The cryptocurrencies with the highest market caps have the most similar trends.
Dollar-cost averaging
Dollar-cost averaging (DCA) is a method many investors follow to reduce the impact of price volatility on their investments. Usually, investors time the market in case of price fluctuations. They follow the ‘buy low, sell high’ strategy. However, many crypto investors in the West often follow the DCA method.
In this process, you invest small amounts on a timely basis. It is quite a popular method of investment. You can use this process for assets that you think will gradually increase in value over time and experience price volatility on their way there. Keep in mind that this is a long-term investment policy. DCA is a popular method of investing for the traditional market (gold, stocks, and other commodities) and cryptocurrencies.
Let’s take an example for your better understanding.
Suppose you start investing $200 in Bitcoin every month. You decide to do it for a year. So, you will have invested $24,000 from your side after the period.
Now, there will be fluctuations along the way. In the weeks when Bitcoin’s price is low, you may feel that your investment at that time is not profitable. But if you consider the big picture, you will see that there are certain weeks that Bitcoin was at a high price, and your investment gave you a good profit.
So, if you see the whole scenario, dividing your investment at a regular interval over a whole year resulted in a good profit. If you compare this to a lump sum investment plan, your entire invested amount suffers from a price fluctuation rather than just a part of it.
The dollar-cost averaging method has other advantages too. You clear away from emotional trading where psychological factors like excitement or fear come into play. It is a much more disciplined method that lets you avoid overbetting or panic selling during times of turbulence. Also, this method is easy on your pocket as you do not have to invest a substantial amount in one go.
Final word
Remember that timing a buy for any crypto coin can be challenging, considering various factors in pricing a coin.
Before you invest, you need to remember a few things. In this crypto market, aiming for a long-term investment goal is the best way. If you buy in small amounts, it will let you test the water before you go deep. You can gain the highest and most reasonable returns from this strategy.
