Recently, the price of 1 Bitcoin exceeded $ 20,000 and many investors immediately bought the currency with hope of its further growth. However, Bitcoin fell to $ 16 thousand and those investors could easily become disillusioned with their investment. So how to choose the time to buy cryptocurrency to avoid such disappointments?
How to choose the time to buy a cryptocurrency: basic points
In addition to the above mentioned case with Bitcoin, the same incident happened to new investors who invested in the ethereum when it reached $ 750 and then plummeted to $ 650. Similar situations arise on the market regularly.
Since cryptocurrencies are generally a very profitable asset for investments, there is a rather high probability that investors who bought cryptocurrencies at the peak of the price will still be in plus in the future due to the fact that the market is booming and the capitalization of the leading cryptocurrencies grows with it.
However, in the above cases, they turned out to be in the minus (at least in the short term), because they invested in coins at the wrong moment and if we were talking about less promoted and reliable cryptocurrencies, this could well turn into financial losses.
Here we would recall the intuition that experienced traders successfully use, but the key word here is “experienced”. They have observed, calculated and studied for years and much more information was deposited in their subconsciousness than in the consciousness, simply because the consciousness is not capable of keeping everything. It is the subconscious juxtaposition of the information “hidden” in the depths of the brain and the new one “works” in the form of intuition, which says “Now is the best moment, buy one!”.
What is the right time to buy cryptocurrency
The best time to buy a particular cryptocurrency is the moment when its price is minimal within the framework of the standard course fluctuations and when there is still a tendency for its rate to rise above its maximum value.
The rate regularly grows and falls in the cryptocurrency market (and in this it does not differ from the traditional one). Most often – no more than 7%, and such fluctuations are called correction.
Often, these are consequences of quite ordinary trading games and a combination of other factors that permanently affect the course and do not go beyond the standard values. The moment when the rate fell by 5–7% and does not continue to fall further (and even increased by 0.1%) and there is an optimum for the purchase of this currency.
A pump is an artificial overvaluation of a course, a dump is an intentional collapse. Both infrequently provoke fluctuations in excess of 25%, although currencies with small capitalization may increase as a result of pump and by 40%, and collapse – by 80%.
Stable, reliable, well-capitalized currencies usually recover quickly after a dump, so it makes sense to buy them when they fall to their maximum. It is better to be careful with volatile currencies. They can fall further due to a decrease in confidence, which inevitably entails a dump.
At the same time, Bitcoin or Ethereum show growth in recent years, of course, not due to the fault of traders, but due to external factors. The same applies to some landslides.
What determines the rate of cryptocurrency and how to predict it
If currency developers modernize it, introducing, for example, more advanced technology to increase anonymity, its market value will increase. Firstly, by increasing real demand from people who need to hide their data, and secondly, by the news that this currency has become better (better than analogs or better than themselves).
It works and the reverse side. If during transactions of cryptocurrency, which provides increased anonymity, someone still managed to find a trace, thereby proving that the statements of the developers are unsubstantiated, the currency will partly lose its technical value and the market value with it.
The same applies to the security of the currency and other relevant technical parameters. If the parameter changes, the course is likely to change in the appropriate direction.
Market factors are what determines the position of a currency in a market. It is determined there, firstly, by traders, and secondly, by the attractiveness of the currency as an investment instrument.
The standard occupation of traders is the purchase of currency when the exchange rate falls (that is why the exchange rate starts to grow) and the sale – with an increase (and the exchange rate falls). These actions usually affect the course as part of the correction.
However, one day a trader with large assets may come and start placing orders for small and medium amounts, slowly buying up currency. This is a pump. For those who have no experience in trading, it looks like a gradual, confident, “independent” growth of the currency, indicating its prospects and that it needs to be bought. Many newbies do it, resulting in situations such as described at the beginning of the article. Pumpers achieve this. The more the course grows, the more people buy coins. When it reaches a certain point, the trader suddenly puts assets on sale, arranging a dump and the course falls.
The higher the current and forecasted volatility, the more attractive the currency for traders is. The higher the likelihood of growth in the long term is, the more attractive it is for investors. The attractiveness of the currency provides a gradual growth of its rate simply due to the demand among traders and investors.
State permit. For example, if a certain country allows the use of cryptocurrency, then it is likely to rise in price. However, a lot depends on the country and on what exactly it resolved. Allowing cryptocurrency in the UK and Uganda will affect the course differently. One thing is if the state simply stated that we do not mind, trade, only you are responsible for the result, and another thing is if it provided protection for sellers and buyers.
Ease of use. Bitcoin, for example, is relatively easy to use. You can exchange it a lot, you can pay it directly. No matter how, say, Vertcoin will not be able to pay directly, in the real exchanger nobody will know about such currency. However, if the developers of Vertkoin put in countries where cryptocurrency is allowed, ATMs with direct exchange of their currency for a dollar, then it will become more valuable compared to peers and its rate may increase.
The media can create or destroy the reputation and image of something and anyone, even if there is a lot of information about a phenomenon or person. When there is little information (and its cryptocurrency is still small and often vague), one piece of news is capable of forming the reaction of hundreds and thousands of people. Quite a popular media with a large audience and a high level of confidence to write about the fall in the rate of the same Bitcoin – people rush to sell it, and the rate will fall even more. At the same time, the fall in the course may be insignificant, within the framework of the correction, but the news scattered across all Internet resources will create a false impression.
Advertising, like the media, informs people about cryptocurrencies in general, they determine that this is a profitable investment and invest, thereby contributing to the growth rate. It can also attract people, for example, by the message that “A new ultra-secure cryptocurrency has appeared.” Naturally, those interested in at least go see what kind of protection is there. As the maximum will gain currency – because of its real merits or illusory.
If there is a lot of positive news supported by facts, then the course is likely to increase. It is necessary to look at the information guide. If it is worth (innovation) – the currency is likely to continue to grow and there will be no noticeable fall. If it is insignificant (a single purchase of a machine for cryptocurrency), it is worth looking at the chart after the news. If there is no noticeable hesitation, it did not affect it because of its irrelevance, if there is, you can wait out the hype.
If there is no information about the currency at all for a long time, then this is an alarm bell that should alert the investor. Unpopular currencies may start to disappear from the market altogether.
Even a clear and thoughtful adherence to all possible recommendations will not help determine with absolute precision the most advantageous moment for buying a currency.
There are too many circumstances that can affect the course and can not be foreseen. In particular, the following contingencies can be identified.
However, all of the above are rather abnormal situations. They periodically arise, but not with such a frequency that the chance to get on them with a one-time purchase of currency was high. At the same time, the key factors listed above characterize the standard situation on the market and therefore it certainly makes sense to be guided by them.
However, you should always remember that cryptocurrency investments are a rather risky phenomenon and to be prepared for the fact that it is not possible to determine the ideal time for investing money.
In this case, deciding the correct choice of cryptocurrency to buy by investing in a promising cryptocurrency, even at the situational peak of its value, is crucial, in the future you will still be able to make good money on its rapid growth.