The potential for high reward returns and the decentralized nature combined with the globalization that cryptocurrencies offer continue to allure investors worldwide. However, when you are a prospective investor it can be pretty hard to know when the best time to pump money into crypto investments is.
To ensure you minimize your losses we are going to have a look at what factors and strategies are worth considering to help guide you whilst making crypto investments.
1- Market Volatility
In a similar vein to fiat currencies, cryptocurrencies have a level of volatility to them. However, often the likes of Bitcoin and Ethereum have seen substantial price fluctuations in cycles of large booms and devastating plummets over recent years. This can sometimes happen in a matter of minutes or hours and can drastically change the worth of the currency. There are several different reasons why this happens including the relative newness of digital assets and the lack of regulations in these currencies when compared with traditional fiat currencies. The speculative nature of cryptocurrencies is also a contributing factor to this volatility.
This rollercoaster of surges and lows can be scary for some investors, but in the same way, it can be highly fruitful when you invest at the right time and know what you are doing. Indeed, many people have managed to earn a lot of money by investing at the right time in cryptocurrencies.
It’s all about searching for when that next boom is likely to be and finding the right trends. This will allow you to analyze and predict the next meme coin to 1000x in value. Meme coins are particularly volatile and can shoot up by 1000x almost overnight; they can also crash just as quickly. For this reason, they make perfect short-term investments.
2 – Market Cycles
Similar to anything in a capitalist economic sphere, cryptocurrency markets are known for their cyclical nature. They often see periods of inflation and rising trends (known as Bull) followed by deflation and falling trends (known as Bear). This is a fairly predictable thing in currency markets but perhaps heightened in cryptos by their very volatile nature. Factors such as technological developments, world news, and wider economic conditions can all have a great impact on cryptocurrencies and their cycles. Knowing where the cryptocurrency is in the cycle and recognizing the timing for clever investment can be a great strategy for getting some handsome rewards for your investments.
This may mean that you invest in a bear period where the currency is worth less in the hope that the cycle will eventually come back around again, boom in a bull period, and allow you to withdraw your investment, which will have increased in value before the cryptocurrency enters the wider bear cycle again. To know when is best to do this is by knowing when to predict the next price pattern is due to happen and be aware of exactly when the market is likely to turn bullish and grow. By doing your research on historic patterns, monitoring external factors, and observing the overall market sentiment, you can more accurately predict when this surge is likely to happen.
3- Long vs Short-Term Strategies
Knowing which strategy of investment you want to follow is important when deciding the timing of your investment and getting the best results from the crypto markets. Where long-term investors are looking at the growth of the currencies over several years and monitoring this increase, short-term traders are more inclined to try and exploit instantaneous market changes.
For those with the view that cryptocurrencies have valid longevity and potential in financial markets, then you may want to consider long-term investments. For those looking for more snatch-and-grab, quick returns then short-term strategies are what you are likely to want to try your hand at. Knowing what your investment goals are before you start is important. This way you can do your research on market trends and the different kinds of crypto you would like to invest in. Remaining informed and being patient is also key to whichever strategy you are adopting as for long-term investments, you may want to wait it out till the market improves for returns, whilst for shorter-term investments, you may want to wait to pounce at the right moment.
4- Regulatory Developments and Global News
Like any other fiat currency in the market, cryptocurrencies remain very sensitive to outside influences such as world news, large-scale events, and regulatory decisions. Government rulings on cryptocurrencies remain fluctuating, which can be hard to keep on top of and is ever changing. Countries like China have recently put in more stringent policies on cryptocurrencies, whilst in the USA, there is a freer license for cryptocurrencies to make their mark in the economic market. Being aware of when the regulations on cryptocurrencies in countries are clear is important, and can be indicated when the likes of national banks and corporations start publicly announcing the use of cryptocurrencies.
Likewise, keeping an eye on the news and recent technological developments around the world is important when investing in crypto. For instance, when large-scale companies such as Tesla announced their allegiance to Bitcoin, the price of it went through the roof, and had you been privy to such information, you could have invested cleverly to be a benefactor of such a rise. Conversely, things like geo-politics can affect crypto markets and tuning into how they are affected during these worldwide issues is important monitoring when you are investing. The market sentiments can also be greatly impacted by social media and the wider metaverse, which is something worth taking into consideration. Yes, even popular culture is a valid marker for how you should invest your crypto.
5- Dollar Cost Averaging (DCA)
Another common approach to crypto investing is to use the DCA tactic. This sees traders approach their investments by placing regular interval deposits into the market, regardless of the price it is currently at, almost like a direct debit straight to your chosen cryptocurrency. This allows you to accumulate more of the digital asset over time and avoid market volatility or trying to time your investment. Over time, this can see great results. This longer-term investment strategy means you take the hits when the market is low but can reap the rewards when it is higher, and ultimately, if the crypto grows over the period you choose to invest, you will be in the money.
Conclusion
Careful consideration of when investing in cryptocurrency is required, just like any other investment. After all you don’t just want to go throwing your money at anything. But with a good strategy and understanding of the markets, their ebbs and flows and consideration for different tactical strategies when investing in these markets, you can be sure to reap the good results. Taking time to do your homework, analyze trends and remain on top of news will likely see you get the best results.
