Crypto: Buying and Risks – An In-Depth Look
The era of cryptocurrency is truly upon us, with numerous experts predicting this for over a month now. The prospect of a future without tangible paper money feels unnatural and unsettling. Physical currency has been ingrained in our lives for centuries. However, if cryptocurrency does start replacing traditional fiat currencies, the question naturally arises – is now a good time to buy into this new asset class?
Finding the Opportune Moment to Buy Crypto
The cryptocurrency market never sleeps – it operates continuously without set start or end times across the globe. One of the biggest advantages is that you can always buy bitcoin or other cryptocurrencies instantly with a debit card or cash. However, timing can be crucial. Is lunchtime, the afternoon, or perhaps overnight the best time to purchase crypto assets? This is an important consideration given the varying time zones worldwide. Even though modern financial markets seem optimized for 24/7 trading, it’s still prudent to carefully consider the most practical timing for your desired actions in the crypto space.
For example, buying stablecoins like Tether or other cryptocurrencies when Wall Street and other major traditional markets are active could provide an advantage and lead to higher profitability over the long run. Even a modest 2% higher profit from well-timed trading can compound significantly over time. Here are three compelling reasons to carefully consider the most convenient purchase timing:
1. Affordable entry price.
Cryptocurrency prices can fluctuate wildly, with swings of up to 50% in a single day being not uncommon at all. Taking the wrong entry point by opening a trade at an inopportune time when volatility is peaking can simply cost you more capital upfront. Conversely, monitoring prices closely and avoiding purchases of costlier cryptocurrencies when there is a high likelihood of price increases reversing course can save you money. Hence, it is crucial to keep a close eye on cryptocurrency prices to obtain an affordable entry.
2. Trading demand varies for different cryptocurrencies.
While there may not be major liquidity issues for an asset like bitcoin, trading demand can differ substantially for higher market cap and lower volume cryptocurrencies. Purchasing a lower liquidity asset at the wrong time might leave you dissatisfied with the pricing you received for the trade execution due to slippage and wide bid-ask spreads. Thus, identifying the optimal times with thick order books can significantly simplify the process of acquiring your desired cryptocurrencies efficiently.
3. Identifying the best purchase times.
No trader can simply buy cryptocurrencies at any random time and consistently profit. If you are able to recognize that prices tend to be approximately 5% higher at a certain time like 10:00 am in your local market, you’ll also realize that period represents an opportune time to take profits on existing positions. Developing this kind of market intuition about ideal entry and exit points for trading cryptocurrencies provides peace of mind, confidence in your actions, and an overall sense of being in control.
These three points regarding timing are absolutely crucial when operating in the cryptocurrency markets. Not everything will go perfectly right away, so it’s important to maintain realistic expectations and not expect miracles from day one. Like any skilled trade, becoming a successful crypto trader or investor takes time and gradual progress.
Factors That Influence Identifying the Best Times to Buy
Supply and demand are the foundational concepts governing prices in any market, and the cryptocurrency space is no exception. However, it’s important to recognize that with crypto assets, you shouldn’t pay too much attention to the assets themselves – people ultimately establish the price by determining what they are willing to pay at any given time. Prices will inevitably be lowest when there is minimal demand in the market from buyers.
For example, crypto traders and whales can be found all over the world in countries like Russia, China, the United States, Europe, and beyond – each operating in their own respective time zones. No single trader working alone on their individual schedule will likely be able to gain an edge or see consistent profitable results. It’s crucial to identify time windows when the majority of global cryptocurrency trading activity is occurring so you can participate in liquid, high-volume markets.
Generally speaking, the busiest trading hours tend to span from 9am to 5pm across major regions. Of course, this integrates all countries’ time zones around the world, not just your own locale. With that said, market volatility remains the key variable at play. The higher the price fluctuations and volatility, the more difficult and unpredictable the process of purchasing cryptocurrencies becomes – directly hindering your ability to profit consistently. Hence, avoiding cryptocurrency purchases outside of these busy periods for international trading activity can help reduce exposure to erratic price volatility.
The specific day of the week is another crucial factor to consider. Historic pricing data shows that cryptocurrency markets tend to be substantially lower and subdued in terms of activity over the weekend compared to weekdays. Liquidity and volumes drop off noticeably. Evidently, prices also do not tend to be excessive during these muted weekend trading sessions. As a result, purchasing cryptocurrencies over the weekend may potentially present an optimal time to get better entry pricing when the market is quieter.
Monitoring current events and news is also advisable when attempting to pinpoint ideal buying opportunities in the crypto markets. Of course, being aware of all the latest important information regarding policy changes, regulatory developments, and major announcements provides an inherent advantageous perspective. For instance, let’s hypothetically say the South Korean government actively began debating potential cryptocurrency regulations in their Congress. Clearly, no one can predict exactly how such a situation will unfold in advance. But against the backdrop of these negotiations and uncertainty, the value of crypto assets could plummet in reaction to negative sentiment – or alternatively rally if the regulations are viewed as favourable for the industry. In other words, by closely following breaking news and developments, you may be able to capitalize by catching the right moment to buy when blood is in the streets or when euphoria takes over.
Here is yet another crucial element to consider: if you are trading a specific cryptocurrency project that is based in or centred around a particular geographic location, that token’s price will likely be disproportionately impacted by news and developments originating from that local time zone. For instance, certain blockchain projects and startups will have their headquarters, core teams, and the majority of their communities concentrated in Asian regions like Singapore, China, or South Korea. This localized factor matters significantly because during the normal workday hours in those time zones, the organized project teams will frequently publish news, community updates, tweets, start heated discussions in their Telegram channels, and make other public announcements. Do you think these developments wouldn’t have a direct impact on that cryptocurrency’s price and market sentiment? Of course they would – likely to an exaggerated degree compared to the broader market’s reaction.
As such, you must make an effort to understand exactly what times various major cryptocurrency projects, exchanges, or other influencers tend to release updates and make announcements since this can create buying opportunities that you’ll need to act swiftly upon in accordance with their localized operating schedules. For instance, American-based centralized exchanges and crypto projects frequently broadcast the day’s news and updates in the evening U.S. time, so you should aim to be more active and vigilant during those periods when liquidity and volatility could spike.
Many sophisticated cryptocurrency traders and investors are constantly attempting to analyse and adapt to the notoriously high price volatility witnessed in markets like the U.S. as effectively as possible. Substantial price swings in either direction are common and to be expected on American trading sessions. Utilizing historical data and pricing patterns, 4:00 pm Eastern Time tends to emerge as one of the most actively traded and volatile windows – representing the best time to trade in New York and on U.S. crypto markets more broadly. You can see how ideal trading times can vary drastically across different regions and time zones; there is no one-size-fits-all universal recommendation as liquidity and activity levels are entirely unique everywhere.
Capitalizing on Buying Opportunities During Market Corrections
In a declining or bearish cryptocurrency market characterized by persistent selling pressure, many contrarian investors have historically succeeded in making money by actively buying the dip. Often, when we discuss speculative trading in assets like stocks or crypto, we are typically referring to short-term traders, speculators, or technical analysis specialists. However, for the average retail investor with a longer-term outlook, market pullbacks and corrections present tremendous opportunities to accumulate positions in high-quality crypto projects at discounted valuations.
This is an opportune time to purchase more cryptocurrency holdings at a discount compared to recent highs, including not only widely-recognizable assets like bitcoin but also a diverse array of other promising altcoin projects that have fallen even more precipitously relative to bitcoin since the market’s recent sharp correction. However, rather than indiscriminately buying any cryptocurrency that is currently discounted, it’s crucial to first conduct thorough research to identify robust projects with strong underlying fundamentals.
Your core focus should be on cryptocurrencies and blockchain platforms that are backed by cutting-edge, differentiated technologies with real utility that will be in rising demand and see widespread global adoption in the years to come. Separating the wheat from the chaff is key – there is an abundance of vapourware, unreliable projects operated by anonymous teams, and outright scams that must be avoided entirely. But right now when the market is in a trough, there is a fantastic chance to construct a diversified portfolio of such high-potential ventures at bargain basement price levels.
The most important piece of advice is to choose the specific cryptocurrency projects and platforms you invest in extremely carefully. While top digital assets like Bitcoin and Ethereum are likely to be permanent fixtures and continuing to gain mainstream adoption, there are also a vast number of inferior cryptocurrencies associated with dud companies, hazardous projects not backed by any fundamentals, and irrational/speculative token offerings that are simply riding the latest hype cycle. These sorts of assets will eventually deflate and implode like a bubble bursting.
Conducting thorough due diligence on factors like the professional backgrounds of the core team, the traction and adoption metrics, the token economics and game theory involved, and assessing the project’s unique value proposition compared to competitors is absolutely essential. Smart contract code audits, ample funding runway, a pragmatic technology roadmap, and a vibrant engaged community also tend to be signs of a high-potential cryptocurrency investment opportunity to prioritize. Other positive signs can include mechanisms to control supply and incentivize holding, such as the Shiba Inu coin burn rate which removes tokens from circulation. In a market awash with thousands of crypto assets, possessing the ability to efficiently filter out the junk and identify the truly innovative projects with long-lasting use cases will separate the winners from the losers.
Overall, the cryptocurrency markets are still in their relative infancy compared to traditional asset classes. While the increased adoption of crypto is inevitable and the innovative blockchain technologies involved are incredibly promising, the ecosystem is constantly evolving and not without its risks. This underscores the importance of carefully timing your entries, wielding proper risk management, maintaining reasonable expectations, and always doing thorough homework before deploying any capital. With patience, discipline, and the proper education, there is certainly money to be made – but blindly gambling on overhyped projects or failing to implement prudent trading practices is a sure-fire way to get burned. Approach the crypto space with an appropriate mix of optimism, caution, and strategy.