The market is currently in a scary place. Investors shouldn’t be afraid to take a look from the sidelines. History has shown that the best time to buy Bitcoin (BTC), is when nobody is talking about it.
Do you remember the 2018-2020 crypto winter. Yes, I do. I do. Smart investors began to accumulate in preparation for the next bull market during this period of long sideways chop and prolonged downtrend.
Although no one knows “when” this parabolic advance will occur, the example was intended to show that although crypto may be in a crab-market, there are still great strategies to invest in Bitcoin.
Let’s look at three.
ccumulation via dollar-cost averaging
When it comes to long-term asset investments, it is helpful to be price agnostic. An investor who is price agnostic will not be affected by fluctuations in value. They will only invest in assets they are passionate about and then continue to build on them. It is more sensible to invest in a project with strong fundamentals, an active use case, and a healthy network than just dollar-cost average (DCA).
This chart, DCA.BTC, is an example.
The results of weekly cost averaging into Bitcoin. Source: DCA.BTC
Over a period of two years, investors who purchased $50 worth of BTC weekly by auto-purchase are still making a profit. By DCA, traders don’t need to trade, monitor charts or suffer the emotional stress associated with trading.
Trade the trend, and take a chance on extreme lows
Investors should not only be able to afford a steady, reasonable-sized dollar-cost average, but also have a solid foundation of dry powder. They shouldn’t just sit around waiting for the next generation of buying opportunities. It’s a good idea to enter the market when it is deeply oversold and all metrics have reached extreme. However, you should not be able to sell more than 20% of your dry powder.
It’s time for traders to look around if price and asset indicators are more than two standard deviations from the norm. To see when assets reach higher support levels, or to previous all-time highs, some traders zoom out to a 3-day or weekly timeframe. This is a signal to invest.
Bitcoin heatmap 200-week moving average heatmap Source: LookIntoBitcoin
Others use price to flip key moving levels like the 200 WMA, 118 DMA and 200 DMA back towards support. To determine when to buy, on-chain enthusiasts often follow the Puell Multiple or MVRV Score.
Open spot longs in extreme sell-offs can be a great swing trade, or entry point to a long-term position.
Related: What is the Wen Moon? Not soon: Why Bitcoin traders should be friends with the trend
Do nothing until the trend changes
It is difficult to trade during a bear market. Capital and portfolio preservation should be your top priorities. Some investors prefer to wait until a trend shift is confirmed. The trend is your friend, as the old saying goes. If you are a genius trader in a bull market, wait for the next bull trend and be happy-go-lucky.
Bear markets, consolidation, and downtrends are known for cutting up traders and decreasing one’s portfolio size. It’s not wise to trade against the trend unless you have a PNL positive trading method and some shorting skills.
It is important for crypto investors to not live in isolation and keep an eye out on the equities market. Many crypto traders tend to focus only on crypto markets. This is a mistake as equities markets have shown strong correlations over the past two year. It would be a good idea to have the S&P 500 and Dow Jones charts, as well as the daily charts for ETH or BTC, in your charting software.
Bitcoin and equities markets: Source: TheBlock
BTC’s recent trend reversal was a result of price action being the canary in a coal mine. It began to chirp more loudly as the United States Federal Reserve increased its intention to raise interest rates. It’s easy to get misled by the tiny movements in Bitcoin’s daily and four-hour price charts. One could easily fall for the lure of BTC’s imminent reversal.
The market structure and the price action of the largest equity indexes can provide valuable insight into whether Bitcoin is a bullish or bearish trend.
Big Smokey, author of The Humble Pontificator Substack as well as resident newsletter author at Cointelegraph, wrote this newsletter. Big Smokey will be writing market insights, trending tips, analyses, and early-bird research about emerging trends in the crypto market every Friday.
Disclaimer. Disclaimer.Cointelegraph does not endorse the content of any product linked to on this page. We do our best to provide you with all the information we can. However, readers are responsible for doing their research and should not rely on this article as investment advice.
Eileen Wilson –Technology and Energy
My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of topmagazinewire.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.