Investing In Cryptocurrency: Where and When Do I Begin?
Last updated on July 24th, 2023 at 04:19 am
Diversifying your investment portfolio with cryptocurrency can be a great option. There is no one-size-fits-all answer for when to invest in cryptocurrency. However, there are certain times that may be more favorable than others to jump into the markets.
The best time to invest in cryptocurrency is during relatively stable markets or during a positive market trend. Waiting for a price dip can work for short-term gains. Buying when prices are low and holding for a significant increase can work for long-term gains. Awareness of your own risk tolerance is advisable before investing.
Starting out small and gradually increasing your investments as you gain more experience is a good approach for newbies. As you might imagine, it is important to research the market and understand the potential risks before you start investing.
The best time to invest in cryptocurrency depends on your specific goals and objectives, as well as how much risk you are willing to take.
Let’s take a look at how to start buying cryptocurrency and when may be the best time for you to jump in.
- Cryptocurrency Overview
- Best Time To Invest
- Where To Buy Cryptocurrency
- Tips for New Investors
- Final Investment Considerations
- Final Thoughts
Before investing in cryptocurrency, remember, this is NOT financial advice, I am NOT a financial advisor. You need to do your own research (DYOR) before investing and don’t invest money you can’t afford to lose. The results that I have experienced does NOT guarantee you will have the same outcome.
Before you invest in anything, it’s a good idea to understand exactly what you are looking to put your hard earned money into.
So, let’s take a look at what crypto is and a short list of tips and benefits of investing.
What is Cryptocurrency?
At its most basic, cryptocurrency is a digital or virtual currency that uses cryptography for security. They operate independently of central banks and governments.
Cryptocurrency works on decentralized networks known as the blockchain. Blockchain is a public ledger that records all transactions in the network.
Cryptocurrencies can and are being used to purchase goods and services online, as well as making investments.
For a deeper dive into exactly what cryptocurrencies are you need to read this article I wrote.
Benefits of Investing in Crypto
Investing in cryptocurrencies is a great way to diversify your portfolio and take advantage of the potential benefits offered by digital currencies.
The highly volatile nature of cryptos is both a blessing and a curse.
Crypto has experienced periods of strong growth and could continue to increase in value over time. But, let’s be honest, cryptos have also experienced extreme bear market cycles.
The beauty of crypto is that it can provide greater security and flexibility when it comes to transferring money, making payments and managing investments.
To learn more about the advantages of cryptocurrency over our current monetary system, this is a must read.
The bottom line is, with the right approach, investing in cryptocurrencies can be a rewarding experience for any investor. Read more about why you should start investing in crypto.
Best Time To Invest
When you do a search online about the best time to invest in cryptocurrency, you get all different types of results. Some of these results include the best day of the week and time of the day to buy crypto.
While the people who have put out this information may have data to back up these assertions, my take on this is going to be a bit more reasonable and easier to accomplish.
There are some general times during market cycles that are better than others to invest. However, if you buy using a dollar cost averaging strategy, you can get a good overall entry price on your crypto investments.
This is where I want to begin our investment journey.
Dollar Cost Averaging
Dollar cost averaging (DCA) is a popular investing strategy used to help manage the risk of buying into different investment markets. Due to the extreme volatility of the cryptocurrency market, DCA can be a very effective strategy for investing in crypto.
DCA involves dividing up your total investment amount, and investing that money gradually over time, instead of buying all at once.
This timeframe can be anything you want it to be, weekly, monthly or quarterly. This is especially effective for those of us who only have small amounts of money to invest but have a longer timeframe to do it.
By doing this, you will spread out your purchase price over a period of time, potentially reducing your overall buy-in price. This protects you from buying during a sudden spike in price. Ultimately, this should help ensure you purchase at a favorable price.
However, using a DCA investment strategy also has an additional benefit. This approach can help you avoid the emotional swings that often come along with investing.
When you see extreme price swings it’s difficult to feel things like FUD, Fear, Uncertainty and Doubt as well as FOMO, Fear of Missing Out.
Making decisions when you are being influenced by these emotions can often lead to poor investment choices and a loss of money.
The bottom line is that following a DCA investment strategy doesn’t guarantee that you will get the lowest purchase price, but it can help to reduce the risks associated with investing in volatile markets.
This investing approach is so important that I’ve dedicated an entire article about it, you should read it for more clarity!
Stable and Positive Moving Markets
Investing in cryptocurrency during stable and positive moving markets can be a great way to capitalize on crypto’s growth potential.
With that being said, as I’ve mentioned many times before, cryptocurrency is the most volatile asset class in the world. So, while investing in an upward moving market can provide a feeling of confidence about investing, the market can change on a dime.
Many inexperienced traders and investors, in all markets, often feel like whatever market they are in can only go up. Obviously, when you think about it logically, or even just look at any market throughout history, we know this is not true.
Ultimately, during these types of market fluctuations it’s a good idea to exercise caution when investing in crypto, or quite frankly any market.
By mentally preparing yourself for the fluctuations that will eventually take place in the market is key. Doing your research (DYOR), and staying up-to-date with the latest news in the cryptocurrency space and the cryptos that you are invested in is the best way to do this.
Ultimately, with careful research and a well-balanced portfolio it is possible to make the most of your crypto investments during these periods.
Buy The Dip
When it comes to investing in crypto, you hear a familiar mantra, “buy the dip.”
This means buying cryptocurrency when its price has dropped significantly from its peak. This can be an effective way to try buying a particular cryptocurrency at the lowest price point possible.
This is similar to a DCA strategy, except that you are not buying on a regular basis. Frankly, using DCA will likely provide you a better overall entry price and more stability in your investments.
However, the idea behind buying the dip is that, if you have done your research, and are confident that a coin will eventually rise back up towards its previous highs, then you should take advantage of the lower price.
This strategy is not without its risks.
Let’s be completely honest, there is no guarantee that a coin will rally after it has dropped in value. With this being said, many investors have been rewarded handsomely when they have chosen to buy the dip.
Buy at Low Prices
Buying cryptocurrency at lower prices can be a great way to increase your profits over the long term. Many investors choose to purchase coins when they are trading at a discount, as this, in theory, provides more value for their investment.
Very often this kind of pricing can’t be done on the open market.
In previous years, this was done through Initial Coin Offerings (ICO) or Initial Exchange Offerings (IEO). These days it is very rare to find these opportunities, however they do still exist. By doing this, investors can capitalize on the opportunities for tremendous gains.
It should be noted that these opportunities are mostly available for investors who reside outside of the United States or for Accredited Investors who reside in the U.S.
However, it’s important to remember that buying cryptocurrency at lower prices doesn’t guarantee a strong return on investment. It is still important to do your research and make sure you are comfortable with the risks involved when investing in any asset class.
By understanding how to properly invest in cryptocurrency, investors can take advantage of periods of low trading prices and potentially increase their overall gains.
Let’s look at how you can start buying cryptocurrency.
Where To Buy Cryptocurrency
These days buying cryptocurrency is a relatively straightforward process… and our buying options are increasing every single day.
There are many different platforms and exchanges where you can purchase cryptocurrency. Simply put, a cryptocurrency exchange is a platform that allows users to buy and sell cryptocurrencies.
Exchanges provide users with a secure environment to trade digital assets, often offering features such as wallets for storage and fiat currency integration. They also have access to real-time market data so customers can make informed decisions when it comes to the buying and selling of their digital assets.
The most popular centralized cryptocurrency exchange options for buying a wide variety of cryptos include Coinbase, Binance, Gemini and Kraken. These are the only centralized exchanges we use and refer U.S. residents to use.
Before selecting an exchange, you need to make a couple of decisions.
What are the most important items for you when it comes to buying crypto?
If maintaining your privacy is paramount, then perhaps using a decentralized cryptocurrency exchange is best for you.
If saving money on exchange fees is paramount, then it’s important to compare the fee structure of each one.
If having the largest variety of coins and tokens is paramount, then you need to decide which exchange gives you the biggest selection. However if this is the case, you might want to consider utilizing more than one exchange to have access to all the cryptos you want.
Another important factor to consider when selecting an exchange is the security. While exchanges take extra precautions to ensure that your funds are safe from malicious actors, hacks do occur.
As a matter of fact, these centralized exchanges are often the targets of hackers due to the amount of potential crypto that is available to steal. Most of the cryptocurrency related hacks you hear about in the news happen at an exchange.
To maximize the safety of your crypto, no matter what cryptocurrency exchange you decide to use, be sure to remove your crypto into a self-custody wallet as soon as possible.
This is such a critical component of your overall safety in the space, I have written several articles about the topic. You should begin here.
Tips for New Investors
If you are new to the investing scene, when it comes to cryptocurrency it can seem a bit overwhelming.
To help relieve some of that stress, let’s take a look at a couple of tips that can help.
Research the Market and Risks
You’ve heard me say it time and time again, Do Your Own Research. But honestly, I don’t think this one aspect can be overstated.
Before investing in any asset, it is important to do your research. Take the time to understand the market and the different types of cryptocurrencies available to trade.
Knowing the risks associated with each type of cryptocurrency and understanding how they work can help you make informed decisions about how much to invest and when to buy or sell certain coins.
Finally, realize that in most cases, once you make the investment the job is not over.
Keep track of news about the crypto market in general and your investment in particular. By continuing to read up on developments you can stay ahead of the curve.
Set a Budget
Whether you’re planning on investing or trading cryptocurrency, it’s important to set a budget for yourself.
Determine how much money you are willing to invest and stick to it.
This step can help to keep you from making rash decisions and help to insulate you from experiencing major financial setbacks.
Though making large sums of money is possible with cryptocurrency, this is NOT a get rich quick scheme.
Having a budget helps you to remain patient and not invest due to emotional swings.
This tip blends well with the DCA investment strategy. It will help you easily fall into a regular investing schedule that remains consistent and won’t break the bank.
These are just a few tips that can help you get started with investing in cryptocurrency.
Right now, let’s look at some final factors to consider before you begin.
Final Investment Considerations
Before you head over to a crypto exchange and start spending your hard earned, and quickly depreciating fiat currency, there are a couple more factors to consider.
Your Risk Tolerance
Risk tolerance is a key factor to consider when investing in cryptocurrency.
It requires an understanding of how much risk you personally are willing to take and what types of investments you are comfortable with.
Generally speaking, the higher the risk involved in an investment, the more reward that can be gained from the investment.
However, it’s important to understand that there is no guarantee that a high-risk investment will be successful.
Before investing, you should assess your own risk tolerance and make sure you’re comfortable with the investment choices you’re making.
Your Goals and Objectives
This is the part most investors skip.
This is probably because they are saying something like “show me the money.”
But honestly, it’s important to set goals and objectives for yourself before you start investing in cryptocurrency.
Setting boundaries for what types of investments you feel comfortable making can keep you from getting caught up in FOMO.
At the very least, determine whether your goal is a long-term or short-term investment. By understanding your time horizon, you have the potential for making better investments.
I discuss these factors as well as other considerations in greater detail in my article Why You Should Consider Investing in Crypto.
Determining the best time to invest in cryptocurrency is more art than science. It is something that should be done only when you are ready to take the plunge.
While investing in cryptocurrency can be a great way to diversify your overall portfolio, it is important to do your research and ensure you are making informed decisions. By properly assessing each crypto investment, you can have increased confidence in your decisions and investments.
You can set yourself on the right investment path by setting realistic goals and investment boundaries. These should ideally align with your risk tolerance and time horizon.
As with most things in life, with the right knowledge and strategy, you can successfully navigate the world of cryptocurrencies and reap the rewards.
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