The Best Time To Invest In Cryptocurrency: A Guide

Investing in cryptocurrency is a hot topic, but it's a volatile market that can be challenging to navigate. With the potential for significant gains, it's no surprise that many people are wondering when the best time is to invest. The crypto market is traded 24/7 globally, making timing a crypto purchase difficult. While there are some common trends, such as prices being lower when the market is less busy, the market's volatility makes it hard to identify reliable patterns. So, when is a good time to invest in cryptocurrency?

Well, it depends on various factors and your individual circumstances. Firstly, it's crucial to understand the risks involved. Cryptocurrency is a highly volatile asset class, prone to significant price swings influenced by market speculation, regulatory news, technological advancements, and macroeconomic trends. It's essential to do your research and consult certified professionals.

Secondly, consider your investment strategy. Are you looking for long-term growth or short-term gains? Time in the market is a strategy that focuses on holding investments for an extended period, riding out short-term fluctuations for long-term gains. On the other hand, Timing the market attempts to capitalise on short-term price movements by buying low and selling high, requiring more frequent trading and a close eye on market trends.

Lastly, a popular strategy to reduce the impact of market volatility is Dollar-Cost Averaging (DCA). This involves investing smaller amounts regularly, regardless of the price, to average out the cost of purchases over time.

Remember, there is no one-size-fits-all answer to when is a good time to invest in cryptocurrency. It depends on your risk tolerance, investment goals, and market conditions. Always do your due diligence and never invest more than you are willing to lose.

Dollar-cost averaging

For example, if you have $50,000 to invest in cryptocurrency, you could spread that money across five equal $10,000 buys at a cost of $50,000/BTC, $45,000/BTC, $25,000/BTC, $25,000/BTC and $55,000/BTC. This would give you an average cost basis of $40,000, and you would have 1.4 Bitcoin. When Bitcoin's price goes back up, your gains will be magnified because you lowered the average cost to acquire your holdings.

DCA is designed to help offset any negative effects on an investment caused by short-term market volatility. It can be a good way to take the emotion out of investment decisions and provides opportunities for greater returns over time. It also means you avoid the risk of buying a large amount of cryptocurrency when prices are high, only for the value to drop shortly after.

However, there are some potential drawbacks to DCA. As you are committing to investing at regular intervals, you may end up spending more money for smaller amounts of crypto if the market goes up sharply. This is the opposite of the intended effect of DCA and can raise your cost basis. Additionally, as many trading platforms charge a fee for each transaction, you will incur more trading costs with a DCA strategy.

DCA is a good option for those who don't want to constantly monitor the market and would rather invest a little at a time over a longer period. It is a lower-risk strategy than lump-sum investing, but it may also generate lower returns.

Time in the market vs timing the market

Timing the market refers to attempting to predict and capitalise on market movements by buying low and selling high within shorter time frames. This strategy requires frequent trading and a close eye on market trends and news. It can be very challenging and is more suitable for investors seeking short-term gains who are willing to take on higher risks and actively manage their investments.

In contrast, time in the market refers to the strategy of holding onto investments for an extended period, capitalising on long-term growth rather than short-term price fluctuations. This could mean buying and holding assets like Bitcoin or Ethereum for several years, regardless of market volatility. This strategy is more suitable for investors looking for long-term growth and stability.

The "time in the market" approach tends to be more successful because the market tends to go up over time, rather than down. However, it requires patience and a long-term perspective, as short-term fluctuations will occur.

For example, let's consider an investor who bought 1 Bitcoin in 2015 when the price was around $300. By holding onto their investment through the ups and downs, they would have seen their Bitcoin reach an all-time high of more than $75,000 in March 2024, despite periods of significant volatility.

On the other hand, an investor who tried to time the market by buying and selling Bitcoin based on short-term price movements may have missed out on these gains. For instance, if they bought Bitcoin at $10,000 in early 2020 and sold it at $30,000 by the end of the year, they would have tripled their investment. However, if they then bought back in at $40,000, hoping for continued growth, they would have faced losses if the price dropped to $25,000 shortly after.

While timing the market can lead to higher returns in the short term, it is challenging to execute successfully due to the volatile nature of the cryptocurrency market. It is difficult to identify reliable patterns and investment triggers, and the impact of factors such as market speculation, regulatory news, technological advancements, and macroeconomic trends can be unpredictable.

Therefore, for most investors, focusing on time in the market is a more prudent strategy. This involves buying and holding cryptocurrencies for the long term, riding out the short-term fluctuations, and capitalising on the overall upward trajectory of the market.

Additionally, investors can utilise strategies such as Dollar Cost Averaging (DCA) to reduce the impact of short-term volatility. DCA involves investing a fixed amount of money at regular intervals, regardless of price points. This approach helps to average out the cost of the investment and can lead to more disciplined investing without the need to time the market perfectly.

Best time of the day to buy

While the cryptocurrency market is volatile, there are some trends that can help you decide when to buy.

Firstly, it's important to note that cryptocurrency is traded 24 hours a day, so there will always be opportunities to buy. However, if you are looking for the best time of day to purchase, experts suggest buying early in the morning before the New York Stock Exchange (NYSE) opens, as values tend to rise throughout the day.

Analysing data from the 90 days prior to September 7, 2022, it was found that the best time of day to purchase popular cryptocurrencies in the United States was generally in the afternoon. This pattern was also observed for other coins with lower market capitalizations, such as Shiba Inu and Dogecoin.

Therefore, if you are looking to buy during the day, the afternoon may be a good time, but for the best prices, buying before the NYSE opens could be ideal.

Dollar-Cost Averaging

Dollar-Cost Averaging (DCA) is a strategy that can be used to reduce the impact of market volatility. This involves investing a certain amount of money at regular intervals, rather than aiming for specific price points. By investing smaller amounts over time, you can avoid the risk of buying a large amount when prices are high and then seeing the value drop soon after.

DCA is a long-term strategy that can help you average out the cost of your investment and reduce the overall impact of sudden price drops. It is a good way to stay disciplined as an investor and avoid the emotional trading that can come with the fear of missing out.

Best time of the week to buy

Monday

Monday is the best time of the week to buy cryptocurrency. The prices are likely to be at their lowest following the weekend's low trading activity.

Tuesday

Tuesday is the second-best day of the week to buy crypto. It is a popular day to set goals and make plans for the week ahead.

Wednesday

Wednesday is often seen as a "hump day", a mid-week day to go out and socialise after work.

Thursday

Thursday is a good day to buy crypto, as it is one of the days with the highest engagement on social media, which can boost market confidence and liquidity.

Friday

Friday is the best weekday because of the full weekend ahead. However, it can be a boring day at work with tests and drama.

Saturday

Saturday is a good day to buy crypto, as it is a day without the pressure of work or school.

Sunday

Sunday is a popular day to rest and recharge, go to church, or spend time with family. However, it is not a good day to buy crypto, as it has the lowest engagement on social media.

Best time of the month to buy

The best time of the month to buy cryptocurrency is typically towards the end of the month. Cryptocurrency prices tend to rise in the first week or first ten days, then collapse and continue trending downward through the end of the month. This pattern is attributed to people selling after the initial price increases.

While this trend is fairly consistent for coins with the highest capitalisation rates, it may vary with some cryptocurrencies or smaller altcoins.

It's worth noting that crypto trends are constantly in flux, so deciding on the best time of the month to buy will require patience as you get to know the pricing trends of your chosen coins.

Dollar-Cost Averaging

Dollar-Cost Averaging (DCA) is a long-term investment strategy that can be used to reduce the impact of market volatility. With DCA, you invest a certain amount of money at regular intervals without aiming for specific price points. This strategy helps to average out the cost of your investment over time and reduce the overall impact of a sudden drop in prices.

DCA is a good way to stay disciplined as an investor without having to guess the ideal moment to invest. It's a popular strategy for buying Bitcoin, but it's not unique to crypto – traditional investors have been using this approach for decades to navigate stock market volatility.

Frequently asked questions