Timing Your Crypto Investment: When Is The Right Moment To Buy?

The crypto market is known for its volatility and cyclical nature, often following four phases which are accumulation, markup, distribution, and markdown. Understanding the market cycles can provide you with valuable insights into when to buy cryptocurrencies for potentially maximum returns. The accumulation phase happens after a market bottom and is the best time to buy cryptocurrency since prices are low.

However, timing the crypto market involves more than just understanding the four phases. It requires a meticulous approach that considers daily, weekly, and monthly trends, as well as specific strategies and common pitfalls to avoid.

Best Time of Day to Buy Crypto

Cryptocurrency prices tend to fluctuate throughout the day, influenced by global trading patterns and market liquidity. While there is no guaranteed best time to buy cryptocurrency, some patterns show that certain hours during the day offer more favorable buying opportunities.

Crypto prices often dip in the early hours of the day, which could potentially be the best time of day to buy, ideally before stock markets open. Another potential buying window often happens late at night when trading activity slows down, and prices may experience a temporary dip due to lower liquidity. The timing is especially beneficial for buying new tokens.

Goran Radanovic from Crypto News explains that upcoming Coinbase listings typically undergo thorough vetting to verify the legitimacy of the project and its potential for long-term investing. You stand to benefit from price appreciation, which is common in new listings and it’s a great opportunity to diversify your crypto portfolio.

Best Days of the Week for Crypto Purchases

Once you begin to understand how crypto market cycles work, the weekly patterns in the market can provide you with insights for timing purchases. On weekends, Saturday and Sunday often see lower trading volumes, potentially leading to lower prices.

Since January 2016, cryptocurrencies have tended to perform better on weekends, with Sunday showing the highest average gains of 0.75% for the overall crypto market. For Bitcoin specifically, Saturdays have been the best day with average gains of 0.364%. However, Mondays are the best time to buy cryptocurrency as well since crypto prices tend to start low before increasing throughout the week.

It’s important to understand that these trends can vary over time and between different cryptocurrencies. The crypto market is highly volatile and unpredictable, so consider the different factors when timing your purchase.

Monthly Trends in Crypto Markets

Monthly cycles in the crypto markets are less pronounced than daily and weekly patterns. The first week often sees increased trading activity, potentially driven by salary payments and monthly investment allocations. Around the middle of the month, some cryptocurrencies experience a temporary dip.

The best time to buy cryptocurrency is typically near the end of the month. Prices tend to increase in the first few days of the month, followed by a price collapse during the second half of the month.

These monthly trends are not consistent across all cryptocurrencies and can be influenced by volatility, the broader market, news events, technological developments, and changes in regulations.

Timing the Market

While timing the market plays a significant role in cryptocurrency investment, finding a balance between short-term tactics and long-term strategy is important.

Effective Strategies

1. Set limit orders: Place standing buy orders at prices below the current market size, This automated technique can help you capitalize on short-term price dips without constant monitoring.

2. Dollar-cost averaging (DCA): Invest a consistent amount of money at set intervals, regardless of current market prices. This approach can help minimize the effects of market fluctuations and alleviate some of the stress of trying to time the markets.

3. Using technical indicators: This takes some experience and knowledge, but it is beneficial to learn. Tools like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) can help you identify potential buying signals. So, if an RSI is below 30, that is an indication of oversold conditions.

Common Mistakes to Avoid

1. Overtrading: Excessive buying and selling can lead to increased fees and missed opportunities.

2. Ignoring the basics: While timing is important, don’t focus solely on the price. It shouldn’t overshadow the underlying value and potential of the crypto project.

3. FOMO buying: As tempting as it is, avoid making impulsive purchases based on the fear of missing out, especially during periods of price increases. For example, Elon Musk’s tweets and appearance on Saturday Night Live in 2021 advocating Dogecoin repeatedly triggered significant price increases, with investors rushing to buy in fear of missing out on potential gains. Shortly after his appearance, Dogecoin plummeted by 36%, leading to significant losses for investors driven by FOMO.

4. Chasing pumps: Buying into a cryptocurrency after a significant price increase can lead to buying at inflated prices.

5. Neglecting risk management: Failing to diversify investment portfolios and set up stop-loss orders exposes you to unnecessary risks.