The markets are scary right now, and while the situation is likely to get worse, that doesn’t mean investors should sit back and watch from the sidelines. In fact, history has proven that one of the best times to buy Bitcoin (BTC) is when no one is talking about Bitcoin.
Do you remember the crypto winter 2018-2020? I do. Hardly anyone, including the mainstream media, was talking about crypto positively or negatively. It was during this period of extended downtrend and long sideways chops that smart investors were accumulating in preparation for the next uptrend.
Of course, no one knew “when” this parabolic advance would take place, but the example is purely meant to illustrate that crypto might be in a crab market, but there are still great strategies for investing in Bitcoin.
Let’s take a look at three.
Accumulation via the purchase average
It is useful to disregard prices when it comes to investing in long-term assets. A price-neutral investor is immune to fluctuations in value and will identify a few assets they believe in and continue to add to positions. If the project has good fundamentals, a strong and active use case, and a healthy network, it makes more sense to settle for the average dollar cost (DCA) in a position.
Take, for example, this chart of DCA.BTC.
Investors who automatically bought $50 in BTC every week over a two-year period are still in profit today, and by DCA there is no need to trade, look at charts or submit emotional stress associated with trading.
Trade the trend and stay away from extreme lows
Along with a steady and reasonable buying average, investors should build up a war chest of dry powder and sit on their hands waiting for generational buying opportunities. Entering the market when it is deeply oversold and all metrics are extreme is usually a good place to open spot buys, but with less than 20% of its dry powder.
When assets and price indicators are two or more standard deviations from the norm, it’s time to start looking around. Some traders zoom out to a three-day or weekly timeframe to see when assets are correcting to higher period support levels or previous all-time highs as a sign of investing.
Others look for price to reverse key moving averages like the 118 DMA, 200 WMA, and 200 DMA to support them. Chain fanatics usually follow the Puell Multiple indicator, MVRV score, Bitcoin Pi indicator or realized price indicator to see when extreme multi-year lows are hit as a sign of when to buy.
Either way, opening a long position during extreme sell-offs usually turns out to be a good swing trade or even an entry point for a multi-year position.
Related: Wen moon? Probably Not Soon: Why Bitcoin Traders Should Befriend the Trend
Do nothing, until the trend changes
Trading during a bear market is difficult, and capital and portfolio preservation are top priorities. For this reason, it is better for some investors to simply wait for confirmation of a trend change. As the saying goes, “trend is your friend”. Everyone is a genius and a superb trader during a bull market, so if that was you, just wait for the next uptrend to happen and be a carefree genius.
Downtrends, consolidation and bear markets are notorious for chopping up traders and shrinking their portfolio size, so it is not advisable to trade against the trend unless you have a positive PNL method for trading during downtrends and a some ability to sell short.
For crypto investors, it is important not to live in a vacuum and to keep an eye on the equity markets. Crypto traders tend to focus only on crypto markets, and this is a mistake because equity markets and the prices of BTC and Ether (ETH) have shown a strong correlation over the two last years. In your chart suite of choice, it would be wise to keep the S&P 500, Dow Jones or Nasdaq charts alongside the daily chart of BTC or ETH.
In the most recent trend reversal, BTC’s price action was the canary in the coalmine that began chirping louder and louder as the US Federal Reserve amplified its intention to raise interest rates. It is easy to be misled by the tiny moves that occur in Bitcoin’s four-hour and daily price charts, and one could easily be lured into heavy positions based on the belief that BTC is about to break. reverse.
Keeping tabs on the market structure and price action of the largest stock indices will provide crucial insight into the strength and duration of any bullish or bearish trend Bitcoin may exhibit.
This newsletter was written by Big Smokey, the author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey will write market insights, practical trend tips, analysis, and early research on potential emerging trends in the crypto market.
Disclaimer. Cointelegraph does not endorse any product content on this page. Although we aim to provide you with all important information we may obtain, readers should do their own research before taking any action related to the company and take full responsibility for their decisions, and this article cannot be considered investment advice.