Bitcoin is a volatile asset class, so it’s considered riskier because the price is expected to be less predictable. The wider the price range from low to high on a daily, weekly, monthly, or yearly basis, the higher the volatility, and the other way around. Bitcoin’s price fluctuates because it’s influenced by supply and demand, market sentiment, and government regulations, to mention a few. Nevertheless, Bitcoin is a high-return asset class, meaning it can potentially deliver high returns depending on when purchased.
Bitcoin is traded 24 hours a day, seven days a week, so it’s hard, if not impossible, to time a buy. As with any investment, this causes much anxiety, uncertainty, or fear to participate. If you’re a risk-averse investor, you might want to wait for a couple of years to see how Bitcoin continues to perform. Maybe you’re indifferent to risk when making investment decisions. In that case, decide where to buy Bitcoin and go ahead with the investment. You might need to pay a higher price to make higher gains in the future.
When Prices Are Fluctuating, How Do You Know When to Buy Bitcoin?
Bitcoin can be used to acquire goods and services, although its acceptance isn’t widespread. It’s best used as an investment vehicle, with people buying and selling as the cryptocurrency’s value rises and falls. Buying Bitcoin is simpler than mining it because the latter has a lot of variables. Bitcoin has a deflationary dynamic due to the fact that owners can lose their private keys, so it’s no longer possible to access the cryptocurrency as the ledger makes all transactions final and non-refundable. Transactions can be reversed only if the counterparty personally knows the sender.
The overall number of Bitcoins that will be created is algorithmically programmed, so there will be no more tokens circulating. As the adoption and demand for Bitcoin increase, its price will also continue to increase. An experienced trader knows exactly when to buy Bitcoin, but it can be challenging for a beginner to tell when it’s the right time to make a purchase, given the widely fluctuating price. If you decide to invest in cryptocurrency, buying Bitcoin when the price is low is wise. For example, you can buy Bitcoin at the end of the month when people are selling their cryptocurrency to pay rent and bills.
Buying Low and Selling High Can Make a World of Difference
Anyone who has traded cryptocurrencies is familiar with the adage “buy low, sell high.” You purchase Bitcoin at a relatively low price and sell it at a higher price to make a profit, which involves timing the market. Since timing the cryptocurrency market isn’t an exact science, it’s hard to tell when it’s hit rock bottom or when it’s reached its peak. To buy low, sell high, you must pay close attention to trends and technical indicators to get a sense of the momentum. The idea of buying low and selling high isn’t suitable for short-term investors because it involves a long-term perspective.
Most importantly, be aware of investor bias, i.e., a baseless assumption or belief that impacts your ability to make an investment decision based on facts and evidence. You might be tempted to follow the crowd due to fear or greed, so the news of a price increase may cause you to panic sell. Refrain from being influenced by the crowd if you want to stand a better chance of making sound decisions about when to buy or sell Bitcoin. Before investing, give yourself a cooling-off period to re-evaluate the long-term implications. No matter how disciplined you are, you might be tempted to act on emotion.
The Best Time to Buy Bitcoin Is When You’re Ready
The right time to buy Bitcoin is when you decide to make it right. Of course, there are better times than others to make investment decisions, but the truth is there’s never really a right time. In essence, it all comes down to how much you really want to invest in cryptocurrency and what sacrifices you’re willing to make during the process. You can use the dollar-cost averaging approach to overcome Bitcoin’s volatility (and avoid the rollercoaster ride). Dollar-cost averaging requires investing a set amount of money on a regular basis. For example, you can purchase $100 of Bitcoin every month. By regularly purchasing coins, you invest more in Bitcoin with time, regardless of what’s going on in the cryptocurrency market.
Ensure the money you use for investing isn’t necessary to keep a roof over your head or pay your bills. The idea behind dollar-cost averaging is to outsmart the cryptocurrency market by investing under any condition. If you’re serious about dollar-cost averaging, have faith that Bitcoin will appreciate over time, although its price fluctuates from one day to the other. It pays to do your homework. Bitcoin recently rose above $28,000 for the first time since August due to ETF optimism and seasonality. Still, there’s no guarantee whatsoever Bitcoin will go up over any given time frame, so setting up recurring buys isn’t a substitute for due diligence.
With Bitcoin, Your Best Bet Is to Hold on For the Long Term
You can buy Bitcoin at various cryptocurrency exchanges that accept fiat currencies. Payment methods range from bank transfers to credit cards. You must pay attention to the choice of wallet, as different wallets support different types of coins. For example, you can’t use an Ethereum wallet to store and secure your Bitcoin, and vice versa. Hardware wallets are the most popular types of Bitcoin wallets because they’re risk-free, offering much-needed peace of mind. A hardware wallet looks like a USB device; you can transact Bitcoin by plugging it into your computer.
It’s best to hold Bitcoin for the long term and acquire a little bit at a time. Due to its highly volatile nature, Bitcoin offers opportunities to build long positions, providing more safety, but you must have sufficient capital to avoid forced sales.