TL;DR
- Timing the purchase of a volatile asset like crypto can be challenging. But there are some optimal windows to keep an eye on.
- Crypto prices start low on Mondays and rise over the week, until they drop on the weekend. In terms of monthly movement, the market moves up in the first ten days, followed by a collapse in the second half of the month.
- If you’re investing in altcoins, you can take cues from Bitcoin to predict how they’ll move in the future.
- A few external factors to consider before investing in crypto are market conditions, market volatility, regulations in your country, fees charged by a platform, the security of the exchange, the taxes you will owe, and the liquidity of the market.
- Some internal factors to keep in mind are your investment goals, risk tolerance, financial situation, knowledge of the market, and exit strategy.
Introduction
In an ideal world, one can say, “Buy low, sell high.” But in reality, it’s challenging to implement even for industry veterans. Timing your crypto purchase is like trying to catch a bullet train. It can be very challenging, considering its volatile nature. You would have missed out on the gains when the price surges, and it would be difficult to cut the loss and exit when the price dips. It brings us to the million-dollar question: Is there a best time to buy cryptocurrency? If yes, then when is it?
Let’s dig in.
When Is the Best Time to Buy Cryptocurrency?
The best time to buy cryptocurrency is when you are emotionally and financially ready. But there is more to it.
There are some optimal time windows and tactics one can consider when buying cryptos. Below are the critical patterns identified based on historical data points.
- Crypto prices start low on Monday and Tuesday and rise throughout the week until they drop again over the weekend. It signifies that prices increase when the market gets active, typically during work hours.
- Prices tend to rise in the first ten days, followed by a collapse during the second half of the month. People might be selling after the price increase.
- Also, altcoins typically follow the Bitcoin price direction, as BTC covers nearly 40% of the crypto market share. Hence, one can take cues from the BTC movement to understand the future direction of the altcoins.
- Specifically, Bitcoin (BTC), Ethereum (ETH), Binance (BNB), Cardano (ADA), and Solana (SOL) tend to rise or fall roughly at the same time.
Nevertheless, the 2022 crypto winter has been causing random drops in prices, which is connected primarily to the widespread fear in the market. So there could be plenty of deviations from these patterns.
Moreover, nothing is constant in the crypto world, which is the problem when finding the right time to buy cryptocurrency. Something true today might not be applicable tomorrow, and no one can predict the future.
But, if you have come this far, I want to tell you some good news. Though the existing patterns might change in the future, you can still improve your odds of investing successfully by understanding certain factors when buying cryptos.
Top 12 Factors You Should Consider When Buying Crypto
1. Market conditions
Investors need to know the broader market sentiments to identify the entry and exit points.
For example, a bearish trend kicks in when investors are fearful. It could be the right time to enter the market as fundamentally strong assets would be available at a discounted price.
You can use the crypto fear and greed index to identify the market condition.
2. Your investment goals
Investment strategy should be based on your financial goals — education fund, retirement, wealth building, vacation, or big-ticket purchases.
If your goal is to build long-term wealth through crypto, you don’t have to worry about short-term market movements. On the other hand, entry and exit timings are critical if you want to accumulate money for short-term needs.
3. Your risk tolerance
Invest only what you can afford to lose. It would be best if you were extra careful when dealing with the crypto market.
You can start with smaller funds to get first-hand experience before deploying significant funds. In that case, even if you make a loss, it wouldn’t affect you much.
4. Your financial situation
One needs to be well aware of their financial condition before investing. Purchasing cryptos with your own money is wise instead of using borrowed funds.
5. Market volatility
Market volatility is the magnitude and frequency of price movements (up or down). You would be better off entering the market when the prices are stable than when there are high market fluctuations.
6. Your knowledge of the market
Educating yourself about the crypto market is vital regardless of whether you have a lot of money. You would be ahead of your peers even with a basic market understanding.
7. Your country’s regulations
Crypto regulation typically has negative connotations. However, regulation leads to the acceptance of cryptocurrencies among investors. Savvy crypto investors understand the existing regulatory landscape and continuously follow up on future developments. It enables them to leverage the rules according to their favor.
8. The fees charged by the platform
There must be a balance between the fees charged and the functionalities of crypto platforms. A platform with exorbitant fees and limited functionality is not a favorable option for buying crypto.
9. The security of the exchange
Many crypto exchanges have faced security issues leading to thefts worth billions of dollars. Hence, selecting a platform with a reliable track record is essential.
10. The liquidity of the market
Before purchasing crypto from any exchange, its trading volume needs to be assessed. Cryptos with high volume are easy to trade as they are highly liquid. On the other hand, low-volume crypto refers to low liquidity, higher slippage, and higher cost.
11. Your exit strategy
Indeed, wealth is created by investing for the long term, but it doesn’t mean one has to hold their investment until death. You should formulate an exit strategy before entering the market (for both short- and long-term). Of course, it might change along the way but having one ready is necessary.
Your exit strategy could be based on a specific price range or % return expectation, or timelines.
12. The taxes you will owe
Indian tax system levies a 30% tax on profits made by trading cryptocurrencies and 1% TDS on the purchase and sale of crypto assets exceeding more than INR 50,000 in a single financial year. It implies that multiple trading entries can lead to a higher tax burden for Indian traders.
Hence, crypto traders and investors need to plan their crypto purchases by considering the taxation rules within their jurisdiction.
Where to Invest in Crypto Now?
Cryptocurrency investing takes multiple forms. There is no one way to invest your money into cryptos. You can invest in individual cryptos or even buy stocks of companies dipping their toes into web 3, like Meta.
Nonetheless, Mudrex Coin Sets is an effective way to invest in crypto for beginners. Coin Sets act like index funds for crypto. – Rather than one crypto, you invest in a group of crypto assets. Each Coin Set is based on a particular theme, research-backed and periodically rebalanced based on its performance to offer better risk-adjusted returns.
Conclusion
People usually believe in timing the market to get the best possible returns.
However, considering the 24 hours trading window and the global coverage of crypto, there is always some news that alters the price direction. Though there are historical patterns to rely on, they might go off the roof anytime.
Hence, it would be practical to buy periodically (dollar-cost averaging) and hold on to the investment for the longer term. It is the optimal approach if you have done the necessary research on crypto assets. Though it doesn’t sound exciting, this strategy generates the highest possible returns.
FAQs
1. What is the best way to buy cryptocurrency?
The best way to buy cryptocurrency is through investing in themes rather than individual cryptos. Coin Sets is an excellent tool as it represents themed collections of crypto tokens that invest in top coins under different categories. They are periodically rebalanced based on their performance to offer investors better risk-adjusted returns.
2. What is the best cryptocurrency to buy?
For beginners, it’s advisable to stick to well-established crypto projects like Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), etc.
These have the largest market capitalization, strong team, robust track record, and best brand name within the crypto asset class. However, doing your own research before making any decision is advisable.
3. Do crypto prices drop on weekends?
Crypto prices drop when there is less market activity. Historical data shows that the crypto market is active during working hours, especially Thursdays. Hence, crypto prices tend to drop on weekends and rise as the week passes.
