Cryptocurrencies have become an important area of investment and are fast emerging as the go-to currency for many. However, any kind of investment brings in some risk and therefore needs a proper strategy. Investors and traders should also be aware of a suitable time to buy or trade cryptocurrencies and select the strategy according to their needs and the kind of trader they are. A majority of investors function on self-knowledge based on previous experiences of the application of successful or failed strategies.
Economists and financial experts have also made their observations on the right time to buy cryptocurrencies based on multiple factors and analysis. This is all the more important as digital currencies do not follow the conditions that affect the price swings of fiat currency. Cryptocurrencies usually depend on momentum, and when the price appreciates, it keeps doing so in the short term. This theory is based on ‘past price action of cryptocurrencies’ like Bitcoin, but before that, let us look at the trade of cryptocurrencies.
Day Trading in Cryptocurrencies
Trade in cryptocurrencies is growing every day; especially day trading has witnessed a recent boom with an increase in volatility and trade volume. Beginners need to know certain aspects of it, particularly in the context of the time to buy cryptocurrency. “Trading crypto generally revolves around speculating on its price, rather than owning any of the actual coins.” New crypto traders should take some time to understand the underlying mechanism and functioning before buying real currency through an exchange. They can opt for brokers who offer ‘CFD or forex’ and can speculate the prices of crypto through the broker page or apps like Hodly.
A few things need to be known before stepping into the dynamic world of crypto trading to improve the trading experience. The first step is to know which cryptocurrency is growing or is experiencing a steady price appreciation. Bitcoin, Ethereum, and Litecoin hold the top spots for user-friendliness and ease of trade, although Ripple, Zcash, Monero also do equally well. Thus one needs to find out the current market position and do his research before investing. Cryptocurrencies have always been volatile and the price fluctuations can be huge, which certainly indicates a high potential for risk. However, the high-risk potential is also associated with the potential for high profits and traders should do a thorough check of the volatility of the exchange before taking an important decision.
Another important tip is to understand blockchain, i.e., a basic understanding of its functioning and operations. One need not become a technical expert in blockchain, but knowledge of the fundamentals will help to respond to and take decisions based on different news and updates. Blockchains function like banks who act as intermediaries, here the blocks record and secure the interaction, and keep them stored in a public ledger. An understanding of storage and sharing on the blockchain network is sufficient to follow the basics of crypto trading. The further actual exchange of cryptocurrencies would require them to be stored in wallets, and one can decide the wallet he wants based on his requirements and the reputation of the wallet provider.
How and When to Buy Cryptos?
A well-planned strategy is thus a necessary prerequisite for buying or trading in cryptocurrencies. One of the strategies followed is ‘swing trading’ where one keeps an eye on the trend and looks out for any kind of correction and “then catches the swing out of the correction and back into the trend.” Traders should also keep a keen eye on the trending news as cryptocurrencies are highly susceptible to any relevant news doing the rounds like any government regulations or hacking of a cryptocurrency exchange. One should also invest some time to analyze the historical price charts to identify certain patterns that would possibly be repeated. This helps in predicting future patterns and prices and would give an extra edge to the crypto trade.
Timing or the time when we buy the cryptocurrency is extremely crucial as not all time slots give the same results, and therefore an ‘optimization’ is required. A meager difference of an extra 2% can make a major difference in the ultimate rewards owing to compound interest. Moreover, cryptocurrency prices can vary over 50% on a single day and thus requires trading at the right time or leads to wasting time in ‘inflated trades.’ Besides the most popular cryptocurrencies, the demand for the lesser-known ones is not consistent, hence buying at the wrong time would result in losses, and one would not get the desired amount. Once the trader knows when prices can possibly rise or fall, he can buy and sell accordingly, as that would simply lead to a manifold increase in profits. For instance, cryptocurrency prices are 20% higher at midnight, but the time would differ for different time zones. Like 9 AM-5 PM China Standard Time, the trade will be highest in China and so on, and thus traders have to decide the time depending on the time zone they are dealing with.
Cryptocurrency is highly determined by the time as the volatility differs with different time slots, and hence buying cryptos within the international time frame is recommended. This reduces the chances of price volatility, although this is also influenced by the demand and supply as prices are low when demand is less; for example, prices are lower on the weekends as demand is lower, which can thus be a good time to buy cryptocurrencies. This remains the usual trend unless the market remains volatile in anticipation of some important announcement like the plans of the US Congress to discuss crypto regulations. Any significant decision tends to affect the prices, and therefore traders should be aware of the current happenings related to cryptocurrencies. The locality also becomes a factor at times, as buying or selling may be affected by the local time zone. Crypto prices may get skewed due to the timing of any tweet or announcement, as these would follow the local time.
A Word of Caution
Careful analysis may show us that the best time to buy crypto is between 3 PM-4 PM and between 11 PM-12 AM. However, no analysis can perfectly predict the exact time to buy or sell cryptos due to many factors. High volatility, unpredictability, bull and bear market which can make trading too predictable and result in a loss and market manipulation by business experts. Trading decisions regarding crypto should also be taken by considering factors like the kind of trader you are, whether short or long term. In the case of long term trade, the time of buying will hardly make much of a difference, unlike for short term investment. Additionally, crypto markets are open round the clock, all throughout the year, which makes them very different from stock markets and adds to their unpredictability. Thus trading should be carefully planned, without putting too much emphasis on the perfect time and by taking into account different factors, depending on the choice and priority of the trader.