Bitcoin Price and Market Dynamics: When To Buy BTC

Bitcoin Price and Market Dynamics: When To Buy BTC

A well-known Chinese proverb states that the best time to plant a tree was 20 years ago. The second-best time is right now.

Financial advisors say much the same about investing. You’d be in great shape if you started investing two decades ago.

Barring the unlikely introduction of investing workstations with time-travel features, traveling back to the beginning of the millennium with your investing fund is not in the cards. That leaves you with the second-best date – and only real option: begin today.

Timing the Market v. Time in the Market

If you’re like most crypto investors, the notion of making an initial purchase today sends you reflexively to price charts to assess whether the market is up or down.

Everyone knows that profitable investing involves buying when prices are low and selling when prices are high. This is what’s known as timing the market. You try to buy at the exact time the price reaches its lowest point and to time your sales to match the highest points.

Although buying when prices are low makes good logical sense, emotions get in the way. Bitcoin and Ethereum have led much of the crypto market into a major downturn since prices peaked in November 2021. Major cryptocurrencies have lost as much as 70% of their value in less than a year.

The buy-low, sell-high formula suggests that today’s market would be a great place to enter crypto investing because you can buy all the Bitcoin you want at a heavy discount. But all over the world, crypto holders are losing their nerve and fleeing the market, selling their holdings at a loss.

Buying low and selling high is especially difficult in the Bitcoin market because of cryptocurrency’s notorious volatility. The BTC price flies and falls dramatically without an obvious cause. Last week’s 200 € purchase may be worth 750 € today – or 75 €.

That’s why most day traders lose money. Timing the market is hard. Warren Buffett is notoriously skeptical of cryptocurrency, but he is a legend among investors and money managers. He and his Berkshire Hathaway partners have made billions for themselves and their clients – without timing the market. “We haven’t the faintest idea what the stock market is gonna do when it opens on Monday,” Buffett says. “We never have.”

That’s one reason financial advisors – including Buffett – recommend a discipline called cost averaging to new and experienced investors.

With cost averaging, you invest exactly the same amount in the same asset every week or month. Over time, you acquire more assets when the prices are low. That reduces your cost basis, which means your profits are higher when the market recovers and you sell the assets.

Ultimately, your profits come from how much time you stay in the market, not how good you are at timing the market.

Taking the Long View

Bitcoin’s price history chart is all steep peaks and sudden valleys when you measure a few weeks or a few months of Bitcoin value. But when you zoom out to examine the BTC exchange rate over a period of several years, the jagged highs and lows are dwarfed by a long-term upward trend.

Over the long term, Bitcoin has easily outperformed most other investments. Here are the compound annual growth rates for some of the most widely held and recommended assets:

Asset              10-year CAGR

Bitcoin             132.2%

S&P 500         16.6%

DJIA               11.41%

Gold                1.2%

It is quite clear from this chart that the Bitcoin price rise has dwarfed the respectable returns earned by investors who chose a traditional asset to invest in.

The Bitcoin exchange rate rises and falls precipitously in the short term. If you’re making short-term investments, you could lose or gain a lot of money very quickly. But these short-term changes in Bitcoin value take place within the context of long-term trends. If you invested 1,000 € of Bitcoin a decade ago, today you would be wealthy.

That’s the sort of investment that pleases Buffett, who famously advises clients, “When you buy a stock, plan to hold it forever.”

Buffett clearly hasn’t made till-death-do-us-part commitments to every asset he has purchased, but he is serious about long-term intention. “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes,” he says. “Our favorite holding period is forever.”

The most successful investors are those who hang on to their Bitcoin and other cryptocurrencies long enough to meet long-term goals. This strategy occupies a special place in the Bitcoin world, where it is known as “hodl” to commemorate a newsgroup typographical error.

Learning From the Past

One good way to take advantage of long-term trends is to use the Kriptomat Recurring Buy feature, which lets you set a schedule of regular purchases on a weekly, bi-weekly, or monthly basis. For the price of a daily cup of Starbucks, you can slowly but steadily build up your crypto portfolio in support of long-term goals like retirement, purchasing property, or paying for an expensive university education.

Recurrent Buy delivers five main benefits that are well-known in the off-chain investing community:

  1. It relieves you of the difficult task of predicting price changes and timing transactions to take place at market highs and lows.
  2. It minimizes the impact of market volatility by averaging out the peaks and valleys on price charts.
  3. It allows you to start meeting your financial goals immediately, without waiting to build up a big investment fund.
  4. It eliminates the harmful effects of hunches and emotions in making investment decisions.
  5. It accumulates more crypto when prices are low, reducing your cost basis and maximizing returns when you sell.

At Kriptomat, there’s a sixth benefit: You can set it up with a credit card for as little as €15 a month and have the regular purchases made automatically while you get on with your busy life.

Investing is always a risk, and it’s especially tricky in the crypto world, where the volatility of Bitcoin prices makes it nearly impossible to time the market. There are no guarantees in cost averaging or any other real-world investment strategy, but hundreds of thousands of Bitcoin owners have found success in considering crypto a long-term investment.

About Kriptomat

Founded in 2018, Kriptomat revolutionized the cryptocurrency world with the introduction of the simplest platform in Europe. Kriptomat makes digital finance so simple that everybody everywhere can access the freedom, fairness, and fulfillment that crypto represents.  Hundreds of thousands of customers across Europe and in 120 countries worldwide trust Kriptomat when they buy, sell, swap, earn, share, and invest in crypto.

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