Bitcoin Investment: Timing The Market Entry

Bitcoin is prone to price volatility, with wide swings to the upside and downside. The most recent upswing comes alongside growing institutional demand for the cryptocurrency as an attractive asset class. Bitcoin's value has rallied over the last few quarters, increasing from about $26,000 in mid-September 2023 to an all-time high of around $73,000 in mid-March 2024.

The best time of the day to buy cryptocurrency is early in the morning before the NYSE opens since values tend to rise as the day goes on. The best time of the week to buy cryptocurrency is on Monday, as prices are lower when the market is less busy over the weekend. The best time of the month to buy cryptocurrency is towards the end of the month, as prices tend to rise in the first weeks of the month and then collapse and continue to trend downward.

However, with the volatility in trading cryptocurrency, the best time to buy crypto is when the buyer is feeling confident in their strategy and financially ready to make a move.

Bitcoin's long-term potential

Bitcoins Long-Term Potential

Bitcoin is prone to price volatility, with large swings in value over short periods. This makes it a high-risk asset that can be difficult to predict. However, some analysts believe that it is a good long-term investment.

Bitcoin's Long-Term Value

Bitcoin's value is influenced by five key factors: supply and demand, media coverage, public interest, government legislation, and its role as a medium of exchange and speculative digital asset.

Supply and Demand

Bitcoin has a limited supply of 21 million, which will not be reached until 2140. The rate of Bitcoin "halvings" (when the reward for Bitcoin mining is halved) also impacts demand. The last halving occurred in April 2024, and the next is expected in 2028. Bitcoin demand is also increasing in countries with high inflation and currency devaluation.

Media Coverage and Public Interest

As a speculative asset, Bitcoin's value is influenced by public opinion and media coverage. For example, a tweet from Elon Musk in 2021 caused Bitcoin's price to drop by 30% in a single day.

Government Legislation

Bitcoin is also influenced by government legislation. For example, China's ban on cryptocurrency in 2021 caused a sharp price drop.

Expert Opinions on Long-Term Investment

Experts are divided on whether Bitcoin is a good long-term investment. Some believe that it has the potential to reach a value of over $100,000 by 2025 and even $1 million by 2030. Others, like billionaire investor Warren Buffet, view it as an unproductive asset with no unique value.

Investing Strategies

When investing in Bitcoin, it is important to remember that it is a high-risk asset. Here are some strategies to consider:

• Only invest what you can afford to lose.
• Treat Bitcoin as a means of slowly growing your wealth rather than an all-or-nothing gamble.
• Diversify your portfolio by investing in other cryptocurrencies or blockchain-based investments.
• Do your research and make decisions based on your own market analysis, rather than following hype or influencers.
• Start small and consider investing no more than 1-5% of your total portfolio in Bitcoin.

The risks of investing in crypto

Investing in cryptocurrencies like Bitcoin comes with a unique set of risks that investors should be aware of before allocating their capital. Here are some of the key risks associated with investing in crypto:

• Volatility: Cryptocurrencies are known for their high volatility, with sharp and sudden price moves in response to changes in market sentiment. It is not uncommon for crypto prices to drop by hundreds or thousands of dollars in a short period. This volatility can lead to significant losses, especially when trading on margin or using leverage.
• Unregulated Market: Cryptocurrencies are currently unregulated by governments and central banks, which means there is limited oversight and consumer protection. The lack of regulation also makes cryptocurrencies more susceptible to fraud, cyberattacks, and technical glitches.
• Susceptibility to Forks and Discontinuation: Cryptocurrency trading carries the risk of hard forks (significant changes to the blockchain) and discontinuation. These events can cause substantial price volatility and even lead to the suspension of trading.
• Gapping: Cryptocurrency markets can experience "gapping" or "slippage", where prices move from one level to another without passing through the levels in between. This can result in stop-loss orders being executed at worse levels than intended, worsening losses.
• Higher Charges and Pricing Variations: Trading cryptocurrencies, especially via spread bets or CFDs, may incur higher charges and fees compared to other asset classes. Additionally, there can be significant variations in the pricing of cryptocurrencies, further adding to the complexity and risk.
• Financial Loss: The highly volatile nature of cryptocurrencies means that investors could face significant financial losses if they buy or sell at the wrong time.
• Future Regulation: The lack of extensive regulation in the crypto space may change in the future, with governments and financial authorities likely to impose additional oversight. This could impact the viability and liquidity of cryptocurrencies.
• Fraud and Cybercrime: Cryptocurrencies are already susceptible to fraud and cyberattacks due to their decentralized nature. A large-scale cyberattack or security breach could limit access to crypto exchanges and ledgers during an emergency.
• Theft or Loss: Access to cryptocurrency exchanges and wallets is usually protected by login credentials, which can be lost, hacked, or stolen. Additionally, cryptocurrencies held in physical wallets, such as hardware wallets, face the same risks as holding cash, including loss, theft, or accidental destruction.
• Limited Use Cases: Despite their growing popularity, cryptocurrencies have limited real-world use cases. Bitcoin, for example, is rarely used as a medium of exchange, and its value as an inflation hedge is questionable.

How to buy Bitcoin

Bitcoin is prone to price volatility, with large swings up and down. Before you decide to buy Bitcoin, you need to understand both it and the wider crypto market.

Bitcoin was the world's first cryptocurrency, created in January 2009 by the mysterious Satoshi Nakamoto. It is a virtual alternative to fiat currency and is built on blockchain technology, which it uses for validation and security.

The best time of day to buy Bitcoin is early in the morning before the New York Stock Exchange (NYSE) opens, as values tend to rise as the day goes on. Monday is the best day of the week to buy, as prices are likely to be at their lowest point following the weekend. The best time of the month to buy is towards the end of the month, as prices tend to rise in the first week and then collapse and trend downward for the remainder of the month.

If you want to invest in Bitcoin, it is recommended to practice dollar-cost averaging, which means buying a little bit at a time over an extended period. This can help you avoid a rollercoaster ride of volatility.

The first step in purchasing Bitcoin is to join a crypto exchange such as Coinbase Global, Kraken, or Bybit. Once you've chosen an exchange, you'll need a crypto wallet, either a software-based "hot" wallet or a hardware "cold" wallet. With your wallet set up and connected to your bank account, you can then place your order.

It is important to remember that Bitcoin is a high-risk asset, and you should never invest more money than you are willing to lose. It is also crucial to prioritise cybersecurity, as cryptocurrencies are a popular target for cybercriminals.

The best time of day/week/month to buy Bitcoin

Time of Day

Bitcoin is highly volatile, and its price can change within a short period. However, research and analysis of crypto market trends have shown that Bitcoin is most volatile at around 1 am UTC. This is likely because this time marks the beginning of the evening in North America and the start of the workday in Asia, meaning Western and Asian traders are likely to be actively trading simultaneously. Therefore, the best time of day to buy Bitcoin is around 1 am UTC.

Day of the Week

The best days of the week to buy Bitcoin are Sundays and Mondays, as the crypto price is usually at its lowest on these days due to lower trading volumes over the weekend. On Sundays, trading volumes on crypto exchanges tend to drop, and some institutional investors, such as the CME Group, do not trade over the weekend.

Time of the Month

The best time of the month to buy Bitcoin is generally towards the end of the month. Prices tend to rise in the first weeks of the month and then collapse and trend downward through the end of the month.

It is important to note that the cryptocurrency market is highly volatile, and patterns and trends can vary widely from month to month. Therefore, it is challenging to identify reliable patterns and choose positions accordingly.

General Strategies

• Dollar-cost averaging (DCA): This strategy involves investing a smaller amount into an asset, like Bitcoin, on a regular schedule, regardless of the price. This can help reduce the impact of market volatility and is a long-term strategy.
• Educate yourself: Before investing in cryptocurrency, it is essential to understand the risks and dynamics of the market.
• Don't panic sell: Hold Bitcoin long-term and avoid selling due to fear or listening to negative online sentiment.
• Understand current markets and trends: Study market trends and make decisions based on these trends, rather than following what every trader is doing.
• Diversify your portfolio: Manage risk by diversifying your portfolio and sizing your positions appropriately.

The impact of ETFs on the crypto market

The launch of the first US spot Bitcoin exchange-traded funds (ETFs) in January 2024 was one of the notable events in the Bitcoin space. ETFs are a popular and flexible portfolio choice that allows investors to benefit from a sector's performance without directly owning the stocks or assets. ETFs are especially appealing in the cryptocurrency market as the technical aspects of purchasing and holding these coins can be confusing and intimidating for the less technologically inclined.

Crypto ETFs are a blend of traditional ETF structures and the digital currency market. They provide direct exposure to a specific cryptocurrency's market price, similar to buying BTC but without the complexities of managing a digital wallet. Crypto ETFs operate by tracking the price of blockchain money and trading on stock exchanges, making them appealing to investors accustomed to the stock market but seeking entry into the blockchain space without the direct complexities of digital currency transactions.

The SEC's decision to allow ETFs lets investors gain direct exposure to bitcoin without going through a crypto exchange or dealing with the headache of storage or security issues. Instead, investors can easily gain bitcoin exposure by owning shares in their brokerage accounts, including individual retirement accounts (IRAs). ETFs are also considered safer from a custody perspective because they are regulated by the SEC, and they handle the safeguarding of investors' bitcoin.

The approval of BTC ETFs has opened the floodgates for institutional capital, signalling a shift towards mainstream acceptance of cryptocurrencies. The market initially experienced mixed reactions, but analysts predict significant Bitcoin ETF inflows in the coming years. Institutional investments bring substantial net inflows, increasing the overall market capitalisation of cryptocurrencies, enhancing liquidity and making the market more resilient to large trades or sudden price movements.

However, there are some drawbacks to crypto ETFs. Investing in a crypto ETF is likely to be more expensive than buying cryptocurrency directly. Crypto ETFs have expense ratios ranging from 0.39% to 1.5%, much higher than the transaction fees charged by crypto exchanges. Crypto ETFs are also subject to the volatility of the crypto market, which means more risk for investors.

Frequently asked questions