When should I invest in cryptocurrencies?

So, you’ve seen the risks associated with investing in cryptocurrencies. And you’ve also seen the opportunities that these digital assets offer. And after a lot of consideration and a great deal of thought, you’ve decided to invest in cryptocurrencies. 

But then, there’s another new question that’s likely to pop up at this point – When to invest in cryptocurrencies? 

If you’re wondering about the right point of entry into the crypto market, you are not alone. There are many investors and traders who are weighing the same question – ‘When should I invest in crypto?’ Is there a right time to enter into a trade? These are the things that we will be looking at in this chapter.

Is there a right time to invest in cryptocurrency?

That entirely depends on your trading goals or your investment objectives, and the kinds of trading strategies you wish to engage in. For instance, in the case of a trader interested in day trading, the right time to invest in crypto would be during a dip in the prices of the coin during the day, so they can sell their holdings when the prices rise a bit within the next 24 hours.

On the other hand, for an investor who is interested in investing over the long term, there may be many ideal points to enter the market, since it is easier to average out the costs over the long run. Buying the market dip is a popular strategy, but it may not be ideal in case of volatile cryptocurrencies, since it gets harder to identify a dip. 

A smarter way to invest in cryptocurrencies

Instead of identifying one single entry point and making a large, lump sum investment, it may be a smarter idea to invest small amounts of money periodically. This way, you can benefit from the principle of dollar cost averaging (or rupee cost averaging).

It brings down the overall cost of investment over the long run, and you can also scale your investment upward or downward depending on the price of the cryptocurrency you wish to buy. For instance, if the prices fall, you can buy more tokens, and if they rise, you can buy fewer tokens. 

Over the course of time, this effectively brings down the unit cost of the tokens you buy. It also helps you tide over the volatility in the prices of cryptocurrencies. And you do not need to time the market, which can be quite challenging to do in the case of cryptocurrencies, given how vastly the prices can fluctuate within a 24-hour window. 

It is for these reasons that investing small amounts in the crypto market periodically may be a smarter idea than entering into one lump sum purchase.

When should I invest in cryptocurrencies?

Aside from deciding the right time to enter the market based on the performance of the cryptocurrencies you are interested in, you also need to identify the right time to invest based on your own personal finances. Here are some things to consider before you take the leap and decide when to buy your first cryptocurrencies. 

• When you have some disposable funds

It is best to not invest any funds that you have set aside for any specific purpose. Instead, you can make use of disposable funds, if you have any. This way, any gains would be bonuses, and in case the markets perform poorly, you would only have lost money that you could afford to lose. 

• When you do not have any major debts or liabilities

Investing in high risk assets when you already have a heavy amount of liabilities and debts is not a smart financial decision. Always remember to repay any debts that you have in your name before redirecting your funds into high-risk assets. 

• When you are willing to take on more investment risk

You can also invest in crypto when your portfolio needs some relanacing, and you believe that it is a good time to take on more investment risk. However, keep in mind that your portfolio needs to be well-diversified too.

Summing up

This should answer the question of ‘When to invest in cryptocurrencies?’ There is no specific right entry point. The right time to enter the crypto market varies from one investor to another, based on what your financial status, goals and investment objectives look like. You can always take the help of a financial advisor. 

A quick recap

• Is there a right time to invest in cryptocurrency? That entirely depends on your trading goals or your investment objectives, and the kinds of trading strategies you wish to engage in. 
• Instead of identifying one single entry point and making a large, lump sum investment, it may be a smarter idea to invest small amounts of money periodically. 
• This way, you can benefit from the principle of dollar cost averaging (or rupee cost averaging).
• Aside from deciding the right time to enter the market based on the performance of the cryptocurrencies you are interested in, you also need to identify the right time to invest based on your own personal finances.