When To Buy Bitcoin

While it is impossible for anyone to know the future price movement of bitcoin, having some understanding of when to buy Bitcoin is important. This article explains several strategies to identify the right time to buy Bitcoin, and when to buy and hold.

What Is The Best Time To Buy Bitcoin?

The best time to buy Bitcoin is dependent on an individual’s investment strategy. However, once a strategy has been chosen, there may be times when the price of bitcoin is more favorable.

According to statistical data compiled by Charles Edwards, Sunday appears to be the best day to purchase bitcoin. By analyzing the returns generated by those purchasing bitcoin on different weekdays, Sunday appeared to provide the best returns across multiple time horizons.

The reduction of trading volume on Sundays could be one reason for this. Although the cryptocurrency market is open 24/7, fewer people trade over a weekend, and some larger institutions, such as CME Group, cease trading altogether. A reduction in trading typically leaves more sell orders in the market in comparison to buy orders. This pushes the price of bitcoin down, providing a slight advantage to traders and investors.

Once trading volume ticks upwards on a Monday, volatility increases, which can lead to a price increase in bitcoin. While Sunday appears to be the best day to buy bitcoin, it is worth noting that the advantage of using Sundays becomes negligible when investing over a longer-term horizon.

Is There A Best Time Of Day To Buy Bitcoin?

The best time of day to purchase bitcoin should only be a concern for day traders and scalpers - those that are looking to take advantage of short-term market volatility. With volatility in mind, many traders and scalpers favor periods when market activity is at its highest. This occurs when major markets overlap.

Market volatility is known to increase when the Asian and European markets overlap between 8 am and 9 am GMT. Market volatility also increases when the European and American markets overlap between 1 pm to 5 pm GMT. For day traders these may provide the best times to capitalize on bitcoin’s short-term price movements.

Why Finding The Right Time To Buy Bitcoin Is Important

For most investors, the aim is to buy bitcoin low and sell bitcoin high. From March 2020 to November 2021 the coin recorded a 1000% increase. However, an investor needed to know to buy in March 2020 and subsequently sell in November 2021 to secure profits.

The problem is that crypto markets change constantly over days, weeks, and months. Consequently, there are times when exchange rates are more favorable. By appreciating price history and the drivers of the crypto markets, investors can ensure that bitcoin is purchased at historically low prices. Buying bitcoin low then increases the chance of selling bitcoin high in the future.

In addition to increased returns, knowing the right time to buy allows an investor to remove the risk of emotion, which can often cloud judgment. Human emotions can result in an investor diverting from a predefined strategy, which can lead to poor investment decisions.

How To Identify The Ideal Time To Buy Bitcoin?

Buying bitcoin near a high is what most investors wish to avoid. Fortunately, there are several market dynamics that can help with that. Understanding market sentiment, macros, and technical analysis can put an investor in a much stronger position when it comes to deciding when to buy bitcoin.

Market sentiment can flip from bullish to bearish at a moment’s notice and change back just as quickly which can lead to wild price swings. When sentiment is bullish, prices naturally trend higher as more investors buy bitcoin in the belief that prices will increase. When sentiment is bearish, prices naturally trend lower as fewer investors are willing to risk capital.

Therefore, counterintuitively, times of bearish market sentiment are typically the best for purchasing bitcoin at a favorable price. One of the best tools for tracking bitcoin’s market sentiment is the Crypto Fear & Greed Index.

Crypto fear and greed index. Source: LookintoBitcoin.com

As a result of the correlation between bitcoin and the stock market, the price of bitcoin is now heavily influenced by global macroeconomic drivers (macros), such as changes to global interest rates. Although uncorrelated with bitcoin, macros influence what investors are willing to risk, which directly impacts how much money is allocated to risk-on assets, such as bitcoin.

Related: What are the main Bitcoin risks for investors?

For example, low-interest rates are typically associated with periods of high growth in the economy. During these times, investors are willing to risk more capital. Historically, this has led to price increases for bitcoin.

On the other hand, high-interest rates remove liquidity from the market and cause a slowdown in the economy. This causes investors to become risk-averse and pull money out of risker assets. During these periods, bitcoin prices have fallen. An awareness of risk trends can help investors avoid market downturns and capture market upturns.

Technical indicators are statistical measurement tools associated with technical analysis - a branch of market analysis that leverages historic price data. Drawing from a range of different data points, indicators can provide insights into the strength of a trend, trading volume, and momentum. Examples of crypto indicators include Exponential Moving Averages, the Relative Strength Index (RSI), and the MACD.

Importantly, the application of technical indicators can help to predict the future price movement of bitcoin, which can help investors identify the ideal time to buy. Alongside technical indicators, chart patterns on crypto pairs are another useful tool that can help investors identify optimum times to buy. Split into continuation and reversal patterns, the arrangement of a price chart can create patterns that can then be used to infer what price might do next.

Should I Buy Bitcoin Low And Sell High?

In short, yes. Investors should buy bitcoin at a low exchange rate and sell bitcoin at a high exchange rate to generate a profit. The time horizon within which this is achieved is unique to everyone. Some decide to trade bitcoin over a short time horizon. Others wish to purchase bitcoin and store the coin indefinitely. But, the aim is always to buy low and sell high.

5 Strategies To Identify When To Buy Low And Sell High

It is important to invest in bitcoin using a strategy that helps to identify when to buy low and sell high. Remember, there is no ‘silver’ bullet. A combination of strategies often yields the best results.

There are three types of market trends: (1) uptrends, (2) downtrends, and (3) sideways trends. An uptrend is defined as a period when prices are increasing. A downtrend is defined as a period when prices are decreasing and a sideways trend is defined as a period when the prices are trading within a range. Analyzing what trend bitcoin is in can help to identify ideal times to buy low and sell high.

Optimum moments to purchase bitcoin occur when a downtrend is transitioning into an uptrend. Bitcoin can then be purchased at a low in the market. Likewise, optimum moments to sell bitcoin usually occur when an uptrend is transitioning into a downtrend. Bitcoin can then be sold at a high in the market.

Technical analysis is a method that leverages historic price data to infer future price movement. Technical indicators, chart patterns, and candlestick patterns all fall under the umbrella of technical analysis. Each tool provides different insights into future price movements and can be used independently or in conjunction with one another.

The method can be one of the most effective ways to identify market trends and reversals, which can then be used to buy bitcoin low and sell bitcoin high. While no cryptocurrency tool is perfect, the use of technical analysis can help to improve the profitability of an investment or trading strategy.

Another strategy that can help investors find the ideal time to buy bitcoin is fundamental analysis. Instead of focusing on historic price data, fundamental analysis focuses on valuing an asset based on all available information.

With regards to bitcoin, this commonly involves evaluating all of the aspects that can influence the supply and demand of the coin. When supply is low and demand is high bitcoin’s price increases. When supply is high and demand is low bitcoin’s price decreases.

While the supply of bitcoin can be estimated from the coin’s existing circulating supply and programmed inflation rate, estimating demand takes a little more work. To evaluate demand investors must analyze factors including the global macroeconomic setting, market sentiment, and on-chain metrics, such as the number of active addresses and daily transactional volume.

Price alerts are excellent for investors that cannot watch the price of bitcoin 24/7. After a range of entry and exit levels have been identified, price alerts can help to warn investors when the price of bitcoin reaches a specific level. Individuals can then react instantly.

Price alerts can be created for both entries and exits. By setting price alerts for when the price of bitcoin falls, investors and traders can ensure that bitcoin is purchased at a low price. Likewise, by setting price alerts for when the price of bitcoin rises, investors and traders can ensure that bitcoin is sold at a high price. Specific crypto charting sites like TradingView can be used to set price alerts across several exchanges.

Stop orders are a type of market order that allow investors to enter and exit positions when a predefined market price is met. Once a stop order has been placed, the order will not be filled until the current market price reaches the stop price. Rather than entering market orders, which are executed instantly, investors can position stop orders to capture price movements - even while away from the computer.

Ways To Know When To Buy And Hold Bitcoin

Many investors choose to buy and hold bitcoin for the long term - known as HODLing. While this method has yielded results in the past it may not be the best strategy for everyone. Here are a few ways to determine if buying and holding might be the right decision.

One of the best ways to identify if buying and holding bitcoin is the right choice is to evaluate the investment goal. Is the goal to make a profit in a short period? Or is the goal to make a profit over a longer time horizon? This choice may depend on how long capital can be used.

If the goal is to make a quick return, buying and holding bitcoin is likely not the best choice. Trading in and out of the bitcoin market frequently would be easier and would keep capital free for other investments. However, if capital can be positioned in bitcoin for a long time, buying and holding might be beneficial.

Bitcoin has experienced 4 market cycles to date. Each cycle is defined by a period when bitcoin has climbed to new all-time highs and has then subsequently retraced 80-90%.

Apart from the first market cycle, these cycles have remained consistent, taking approximately 4 years from either peak to peak or bottom to bottom. Some argue that this is the result of bitcoin’s halving event, which also takes place every 4 years. Importantly, the timing of each cycle can provide a good indication as to whether an investor should buy, or hold bitcoin.

Each cycle can be broken into four phases - accumulation, markup, distribution, and markdown.

• Accumulation. Investors remain uncertain, while market volatility and trading volumes are low.
• Markup. Market sentiment shifts to bullish as economic conditions improve. Prices start to trend upward and there is an increase in trading volume as investors enter the market.
• Distribution. Market sentiment becomes greedy and overconfident. Price advances begin to stall.
• Markdown. Market sentiment turns bearish and economic conditions worsen. Prices start to trend downwards with increased trading volume as investors exit the market.

wyckoff distribution chart. Source: Stockcharts.com

When purchasing bitcoin during the accumulation or markup phase, there may be no need to buy and hold. If prices increase soon after, bitcoin can be sold for a profit. Meanwhile if purchasing bitcoin during a distribution or markdown phase, investors may need to hold on to bitcoin until the price increases once again.

While market cycles should be acknowledged, it is important to remember that there are only a small number of data points to draw conclusions from. Market cycles may not stick to the classic 4-year rotation in the future.

Wyckoff accumulation chart. Source: Stockcharts.com

One of the easiest ways to know if a buy-and-hold strategy is the right thing to implement is to monitor bitcoin prices. After purchasing bitcoin, if the price of the coin starts to fall, holding on to the coin for a longer period will increase the chance of being able to sell the coin for a profit. When trading bitcoin, bitcoin prices will need to be monitored daily. When investing in bitcoin, checking bitcoin prices once every week should suffice.

To help assess if HODLing is the right decision, investors can also consult bitcoin pricing models. Charts such as the Stock-to-Flow and Rainbow charts can provide additional insight into bitcoin’s price movements.

• Bitcoin’s stock-to-flow chart tries to predict future value changes based on the ratio between the coin’s circulating supply (stock) to the rate of production for any given year (flow). The chart is based on the theory that a high stock-to-flow ratio infers that there is more scarcity, which often leads to a higher price. Therefore, where the price of bitcoin lies on the stock-to-flow model can help investors decide if now is the right time to hold or sell.
• Bitcoin’s rainbow chart is another tool that helps to predict bitcoin’s long-term price movements. The chart fits logarithmic growth bands over a logarithmic chart of bitcoin’s price. Each band represents a period of market sentiment. The band that bitcoin’s price currently falls in can help to indicate if bitcoin should be sold or held.

How Low Can Bitcoin’s Price Go?

Technically, it is possible for bitcoin’s price to go to zero. However, for the value of bitcoin to fall indefinitely, access to the coin needs to be completely removed or faith in the coin needs to be completely destroyed. Fortunately, there are a only handful of scenarios where this could occur.

Scenarios that could push bitcoin to zero include a worldwide ban on its use and operation, the revelation of bitcoin’s creator, or the creation of a replacement. While it is naïve to think these are not possible, the reality is, these scenarios remain highly unlikely. Bitcoin’s infrastructure, first-mover advantages, institutional adoption, and encompassing community are all factors supporting the coin’s price.

Frequently Asked Questions

Conclusion

The bitcoin market is one of the most volatile in the world. Unfortunately, the volatility is likely to continue and Bitcoin and will not become stable until further regulation and governance is implemented. As a result, deciding upon the best time to buy is one of the toughest decisions bitcoin investors face. But risk vs reward on this speculative asset can be stacked in an investor’s favor by knowing when to buy and sell.

For short-term trades, periods of high market volume, such as the overlap of global markets offer day traders the best opportunity to take advantage of bitcoin’s volatility. However, for long-term cryptocurrency investments, it is more important to review the health of the global economy, bitcoin halving events, and whether any other bitcoin price catalysts are on the horizon.

Once a purchase has been made, history shows that the chance of profits is strongly correlated with the time that bitcoin is held in a crypto wallet.