Those who are getting into cryptocurrency for the first time in 2022 may feel like they’ve already missed the boat. However, the reality is we’re still very much in the early days of this new technology. People who found out about bitcoin in 2013 thought they were showing up late to the party. However, there is still plenty of potential when it comes to the future growth of the crypto market.
Those who are looking to make their first crypto investment, usually wonder if now is a good time to enter the market. This desire to time the market perfectly is rather common among those who are making their first crypto investments. However, this is not the most advisable strategy when it comes to the risks associated with such a volatile market.
Typically someone involved in cryptocurrency (for a long time) has been asked if now is a good time to invest in the crypto market at some point. This is a rather difficult question to answer. Even bitcoin is still highly volatile and hard to predict over the short term. It is important to stop worrying about if crypto will rise or fall over months or years. It is much better to take a long-term view on bitcoin and other crypto assets.
This does not mean the best way to get into bitcoin is to buy a lot and sit on it for years. In addition to the long-term view on crypto’s potential, it makes sense to allocate funds to this market over time rather than all at once. As mentioned previously, crypto prices can fluctuate wildly over the short term. This means it’s best to make weekly or monthly purchases of an asset where you have long-term conviction about cryptocurrency’s future price. This averages out your effective buy price and removes much of the risk associated with short-term price swings. This buying strategy is dollar-cost-averaging (DCA). It can help you make sure you don’t dig yourself into a hole after you make a large allocation to a particular crypto asset in one buy order.
Of course, when you are following a proper DCA strategy it’s much easier said than done. People’s emotions tend to take over when there is a lot of hype around a particular crypto project. This is also when the fear of missing out (FOMO) becomes too powerful. If you are going to try to time some of your crypto investments around supposed buying opportunities, then it’s important to make sure you aren’t just buying the top of a short-term crypto asset bubble that is about to pop.
For example, if a crypto asset has increased in value by 1000% and is in heavy discussion in the media, then you’ve probably already missed the boat on short-term gains. For example, there was an infamous situation in early 2018 where CNBC’s Brian Kelly taught the audience how to buy XRP near the crypto asset’s all-time high of roughly $3. In May 2022, XRP is trading for around $0.35. On top of the media indicator, you should be wary of investing in any crypto asset that is in talks by everyone. As the 1st Chair of the U.S. Securities and Exchange Commission Joseph Kennedy said, “When even shoeshine boys are giving you stock tips, it’s time to sell.”
Those who wish to time the market should do most of their work when nobody is talking about crypto. This is when prices will be at their most depressed levels and the largest opportunities for gains exist.
Lastly, when it comes to timing the market it’s vital to understand that all crypto assets are not made equally. In fact, when you get out of the top 25 or so crypto assets listed by market cap, you really aren’t doing anything much different from gambling at a casino. Terra and Bitconnect are examples of this. They have shown, even large projects can completely fail or turn out to be nothing more than outright Ponzi schemes. There’s nothing necessarily wrong with doing your research and placing a long-term bet on a low-value crypto asset. However, these can be extremely high-risk bets. You may end up losing nearly all of your initial investment in a short period of time.
If you are new to the crypto market try to stick with a large and established crypto asset. One example is bitcoin. It has mostly proven that it isn’t going to disappear at any point in the near future. You should set up weekly or monthly purchases of bitcoin. It’s an easy way to get your feet wet in this market. Then you can begin to do more research into other crypto assets as you learn more about the technology. At the very least, make sure to avoid purchases of the hottest new crypto coin. These coins are usually in celebration all over social media due to a recent explosion in price. Usually anything that goes up in price too quickly in this market will eventually be brought back to reality.
This disclaimer informs readers that the views, thoughts, and opinions expressed in the text/sponsored content belong solely to the author, and not necessarily to Bitcoin of America, organization, committee or other group or individual. All investments are at your own risk and should be done after careful research.