Is Now the Time to Invest in Cryptocurrency?
Hailed for disrupting the financial industry on one side and criticized as volatile on the other side, cryptocurrencies have established themselves as a new way for enthusiasts to invest and cash in on the opportunities afforded by digital assets. For investors, the most critical factor is when to invest.
With the volatility of cryptocurrencies, trading cryptocurrencies requires precise timing to achieve profitability. For instance, between 21st -27th November 2020 alone the largest cryptocurrency, Bitcoin (BTC) soared from under $17,000 to over $19,500 before plummeting to below 16,500.
Thus, finding the right time requires the investor to be proactive, keenly following market trends, and making precise predictions on the future of crypto markets.
The Current Cryptocurrency Market
Cryptocurrencies have gained significant value since the start of 2020 and investors who bought cryptocurrencies earlier in the year can be sure they have made gains with over 80% profit margins if they choose to cash in the gains. Currently, the value of digital coins is barely moving sideways, with sudden spikes and sharp drops making it a high-risk time for buying cryptocurrencies.
But there is more to this statement; with high risks, significant losses are likely and so is the likelihood of high gains.
The Right Time to Invest for Some
For proactive investors, allocating capital for long-term and short-term investment is key. The volatile market at this period is a ripe moment for short-term investment.
For this current state of the crypto market, however, you should not purchase cryptocurrencies for long term prospects of gaining. Otherwise, you risk purchasing the digital coins at a relatively high price that will eventually dip to a new bottom price when the markets become less volatile.
Even for short-term investments in such volatile markets, be careful to limit the capital you choose to invest in digital coins as huge investments could be lost in a very short time.
During a sideways market trend (where there are little price fluctuations in cryptocurrency value), there are lower risks involved, making short term investments barely profitable. These markets often signal bottom values for cryptocurrency values and are the right time to make long-term investments. In such times, cryptocurrencies gain value steadily over time with a few subtle drops in value.
Can a New Investor Get Started Now?
The hype over cryptocurrencies is often high during volatile trends as the market currently is. More people are brought to the attention of the ‘revolutionary effect’ of cryptocurrencies on the financial industry. Further, others are pressured to invest in cryptocurrencies, touted as the currency of the future.
As a prospective investor, such sales gimmicks that offer partial truths could lure you to invest during such high-risk times and possibly suffer significant losses. Since new investors have little experience in studying market trends to know how to best trade in highly volatile markets, these huge losses will create panic for other new investors.
Thus, the market at its current state is unfavorable for new investors. However, if you do choose to begin investing in cryptocurrency, we recommend that you begin slowly. Be sure to also protect your crypto assets with a high quality hardware wallet.
Understanding the Crypto Market Trends
Choosing the time to invest will depend on many factors that frequently predict future trends with precision. For instance, following the steady price valuations, Bitcoin halving earlier this year also indicated that the cryptocurrency would gain value in the coming months and set a new bottom.
The recent influx of interests from corporate firms and huge individual investors such as PayPal has driven the value of cryptocurrencies up. However, rumors of possible regulations against cryptocurrency operations have resulted in huge price drops for the digital coins as many fear possible restrictions and interference from central banks and governments.
Cryptocurrency markets are subject to several factors, including geopolitics. Keeping track of many of these factors will help you understand the risks involved and evaluate the viability of making either long-term or short-term investments at low risks with expected higher returns on investment.
As most cryptocurrencies tumble and struggle to maintain momentum over their current value, most long-term investors have predicted new bottoms, beyond which they will sell off for their target gains. For instance, some investors predict a $14,000 to $15,000 range as the new bottom where Bitcoin’s price will settle.
Now is the time for short-term investment in cryptocurrencies. Ensure you carefully invest, putting fair amounts to purchase when prices dip and selling when prices soar to your set targets.
Long-term investments will have to wait longer until crypto markets are fairly stable.
Price volatility driven by speculations such as the current one are a huge risk for purchasing digital coins for long-term investment. Contrasting the two scenarios, it is prudent to note that the time to invest could be whenever, depending on how skilled one is to make gains at each time. So, get started on your short-term investment today!