When is the Right Time to Buy Cryptocurrencies?
New to crypto? Is now a good time to buy? Or is it better to wait and hope the price goes down a bit? This is a question that you have surely asked yourself at some time.
The opinion here is that if you have already studied the subject and believe in the phenomenon of cryptocurrencies, the best thing you can do is buy now and wait. This strategy is better than trying to find the right moment. Here’s why.
Some possible scenarios
First, and to warm things up, how much would you have today if you had bought 100 dollars 1, 3 or 5 years ago?
Ah! So, buying a year ago was not a good time. 3 years ago yes. Depends.
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Firstly, no one (NO ONE) knows how the price will move in the short term. There are very, very intelligent people who are dedicated to this. They use extremely far-fetched mathematical models. And the best they can come up with is probabilities. They say, “It will probably go up.” But many times, they are wrong. So as a consequence, they use strategies that allow them to limit losses. They are professionals whose success depends on doing this well. Yet it is common for them to make mistakes.
Some people say, “Bitcoin is volatile, so I should wait for it to drop a little more to buy.”
This is the great illusion that leaves the extra-cautious always outside.
When the price was at $30,000 you didn’t buy. Our stats say that if the price dropped to $30,000 again, you still wouldn’t buy. You think you would, but it’s an illusion. If the price were to fall to that level, you would wonder if it will continue to fall. As a consequence, you will miss the opportunity again.
We all like to buy cheap, but what is the cost of “waiting until it is cheaper?” It is proven that it is more expensive to try to beat the market than to have discipline and buy periodically.
New to crypto: What you need to know
Let’s do an exercise. Suppose you have 1,200 dollars to invest per year. Maybe you could always manage to buy at the lowest points and never go wrong (an inexperienced investor is wrong more than half of the time). Even so, it would be more profitable to simply buy 100 every month, without ever looking at the price (at Buda.com you can automate that process).
Here is an example with 50 years of data from the S&P500.
“Buy the Dip” means to buy whenever the price falls. The red dots on the blue line.
DCA (dollar-cost averaging) means buying periodically regardless of price.
As you can see, in the long term with the DCA strategy, the investor manages to earn more than buying the dips. And ‘buying the dips’ means that you managed to guess 100% of the time when the price would stop falling. This is practically impossible, even for professionals.
Winning strategy: buy periodically regardless of the price.
Don’t try to beat the market
What we want to convey to you is the following. Don’t try to beat the market. If you think that the technology and the phenomenon of cryptocurrencies are here to stay, go for it. Invest a responsible and long-term amount. Those who bought in December 2017, when the price almost touched 20,000 dollars, had losses for almost 3 years. But today they are 100% up on their investment.
The important thing is not the short term, but the fundamental news about adoption, and here we have good news.
-In just 12 years Bitcoin became a national currency. The currency of El Salvador.
-Bitcoin is the 15th largest currency in the world, behind the Russian Ruble.
-Today there are cryptocurrency companies that have a banking license. There are crypto banks.
-Multiple publicly-traded companies hold bitcoin in their reserves.
-Wall Street legends believe it is the future, like Ray Dalio or Paul Tudor Jones.
-The adoption rate of Bitcoin is higher than the Internet when they were the same age. As the growth goes, Bitcoin will surpass one billion users by 2025.
If you are not a professional, this is the news you should be watching. And if it seems like a sufficient argument to you, we recommend investing with peace of mind: in the long term.
As an interesting fact, 99.9% of people who have invested in Bitcoin and who have held the cryptocurrency for four years are positive.
Are you new to crypto? Got something to say about it, or anything else? Write to us or join the discussion in our Telegram channel.
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