Best time to buy crypto!
“Buy when there’s blood in the streets, even if the blood is your own.”
Nathan Rothschild
Most of the people, specially the newcomers start to investing in a wrong time. Usually it happens close to the end of the cycle when prices are already inflated, mainstream media tells stories about crypto millionaires, and everyone’s expectation is that Bitcoin and other crypto will reach crazy new price levels. Those people usually are shocked when prices are going down and panic sell with a loss.
It’s impossible to perfectly time the market but there are definitely some better and worse moments to buy or sell and indicators that can help you with it. Let’s have a look at a bitcoin chart for the last several years:
Accumulation Zone
The green area is the area where historically buying is most profitable, called the accumulation zone. In that stage most of the media are either negative or don’t even talk about the crypto. Your spouse is blaming you for wasting your money on speculative investors, and you even ask yourself a question why you decided to invest into crypto.
Breakout zone
The red areas are when price broke out to an upside and the move was parabolic, that’s when we should consider taking profits. The steeper the rise up the faster (at least historically) the chances are the price will get back down. It’s important to take profits on the way up and way down during parabolic moves because it’s impossible to time the perfect top
Retrecement zone (Dip)
Finally the yellow areas are retrecements or dips. Historically after Bitcoin price dropped significantly like (20% or more) those were good moments to buy back. Again no one can guarantee the price won’t drop further, but in general long term it should recover and reach even higher levels.
Best time to sell
So the best time to buy is in the accumulation zone, when everyone hates crypto. How about selling it?
Keeping it simple: Sell when it doubles
Another popular exit strategy that I use is to sell 50% of your portfolio when price doubles. For example you bought 1BTC for $10,000. The price went up to $20,000. Sell half to recover your initial investment and hold the rest risk free for the long term. How long? That depends on your individual scenario, risk levels and perhaps other circumstances. You could set the next selling levels when your portfolio doubles again.
Support and resistance
Another way to do it is to set buy orders at the support, a price that during downtrend was tested but wasn’t broken. Let’s look at the chart again:
Support line or area is indicated by the green boxes. There might be several areas of it, if one is broken down traders focus on one below. Same thing with resistance. If during an uptrend the price breaks the resistance it becomes a new support and the red areas would become green.
Measuring market sentiment
Crypto Fear and Greed index is an indicator that has a scale from 0–100. The lower the scale is the more fearful the market is, the higher indicates market greed and euphoria. Historically buying at the maximum fear levels (under 25) and selling at extreme greed (over 75) was very profitable. You can check current levels at the website:
https://alternative.me/crypto/fear-and-greed-index/
If you like this content and would you like to learn more please consider getting my book: Retiring with Bitcoin and Real Estate It covers many practical investment advises for combining investing in different assets classes.
Source: Retiring with Bitcoin and Real Estate https://www.amazon.com/Retiring-Bitcoin-Estate-Janusz-Chudzynski-ebook/dp/B0B84HFZFL
