Bitcoin has been all over the news recently. Many are touting the financial and technological innovation as the future of money. The same voices believe that the impact that the world’s number one cryptocurrency could have on society will be far greater than that of the internet.
One of the most exciting things about this potential paradigm shift is that owning some Bitcoin is entirely permission-less. You don’t need to prove your eligibility to anyone to take part. All you need to do is find someone selling it. This isn’t exactly difficult either. From peer-to-peer marketplaces to Bitcoin exchanges and brokerages, there are loads of services designed to provide exposure to Bitcoin. If you’re lucky, you might even have a friend or relative willing to sell you your first Satoshis!
Before we get started, here’s the mandatory disclaimer:
This is not investment advice. Do your own research and decide for yourself whether you want to get involved. If you do, don’t put your life savings on the line – only invest what you can afford to lose!
Disclaimer out of the way, let’s consider the best time to buy Bitcoin.
What Do You Want From Bitcoin?
The most important thing to consider before buying Bitcoin is your own goals in the space. This will have a large impact on when you decide to make your purchase. Here are some of the most common goals for people getting started with cryptocurrency.
One of Bitcoin’s strongest qualities is that it can be used to make fast, cheap, and reliable cross-border payments. If you simply want to forego the ludicrous fees and waiting times that legacy solutions such as wire transfers demand, the optimal time to buy Bitcoin is right before you want to send it.
This is because Bitcoin is incredibly volatile. If you want to make remittance payments, pay a remote employee, or have any other reason for transmitting value across borders quickly, you want to expose yourself to as little of this volatility as possible. For this reason, buying right before the transaction and having the recipient sell Bitcoin as soon as they receive it is the optimum strategy. Of course, if the person receiving the funds wants to, they can hold onto their Bitcoin and hope it appreciates in value. That’s entirely up to them.
Protecting Your Wealth
Despite its volatility and a rather spectacular plummet in value during 2018, Bitcoin isn’t actually the worst performing currency on the planet according to the year-to-date statistics. The Venezuelan bolivar, Argentinian peso, and Sudanese pound all lost more purchasing power than the number one cryptocurrency.
For people in these nations, Bitcoin could be a necessity. It could have helped to protect their life savings from their government’s heavy-handed approach to economics. For the first time in modern history, citizens have a permission-less exit from their own national monetary systems.
This was the case with the Greek debt crisis a few years ago when many people turned to cryptocurrency trying to protect the value of their savings. Whilst those that didn’t - lost nearly everything to inflation.
If you’re reading this in a country that is suffering from the side effects of the mismanaged economy, the best time to buy Bitcoin is yesterday. The second-best time is right now!
Most people reading this article won’t be interested in Bitcoin for its potentially world-altering features, unfortunately. They’re here strictly for the potential gains. Speculation might not be the noblest reason for getting into cryptocurrency, but it’s certainly the most popular (for now).
Since Bitcoin is strictly limited in its issuance, providing the demand continues to increase, so will the price. With Wall Street eagerly waiting on the sidelines for the infrastructure to improve sufficiently to start making billion-dollar orders and the market seemingly finding a bottom around the $4,500 range, buying some Bitcoin sooner rather than later is probably the best idea for pure speculators.
Although market demand isn’t particularly great right now, evidence suggests that institutions are stocking up on coins behind the scenes at over-the-counter trading desks. With much of the readily available Bitcoin eaten up by these big spender types, once standard market interest picks up again, the price should surge even more dramatically than it has previously – it’s all supply and demand!
Dollar Cost Averaging
Of course, taking up a large position in Bitcoin is a daunting prospect. Even when investing an amount that you could comfortably afford to lose, picking a single time to enter is tricky without vast experience as a trader or chart analyst.
Fortunately, there is a great way to spread out an investment over a longer period. It’s called dollar cost averaging and involves buying a smaller amount of digital currency over a few weeks, months, or years. You set an amount you’re comfortable with and commit to buying that figure at the regular intervals you set for yourself. This averages out the price volatility over time and allows your entry to be much less stressful than dropping a large amount and simply hoping.
Let’s suppose you wanted to buy $1,000 worth of Bitcoin. For this example, we’ll assume that $1,000 represents quite a lot of money to you, and you would not want to go broke if it went to zero overnight. Rather than buy it all in one go, you could spend $100 every week until you have made the total investment you want.
If you were to buy $1,000 worth of Bitcoin outright, it would be awful if some market-shaking news was announced the following day and cut the price of Bitcoin in half. With a dollar cost averaging strategy, it wouldn’t be so bad. By dollar cost averaging, your first two purchases might have been made at today’s prices of around $6,500. The next three might be at $7,000, and the final five at $4,500. This would make your average entry $5,650 – a much better scenario than if you had entered $1,000 at $6,500 and watched it dwindle as prices fell to $4,500.
Bitcoin represents an exciting time in global finance now. But before investing, it’s important to read up on exactly what you are buying into and how it could potentially change the world. If you fully understand the potential implications, it makes it much easier to hold through the rampant market volatility. Remember, an overhaul of an entrenched financial system will take time – so be ready for the long game.
If you want to stay in touch with our community of people, join our FREE Discord Channel which has 24/7 Discussion about the markets.