Time To Buy Bitcoin
As troubles in the traditional banking sector grow, bitcoin is benefitting, and risk sentiment has turned bullish on the once-beleaguered coin. Starting 2023 at around $16,600, the bitcoin price has risen a dramatic 70% and now sits around $26,969 as of 28 March.
time to buy bitcoin
One of the primary drivers of the recent rise in bitcoin price is the goldilocks market regime that appears to be developing. Inflation in the US has fallen from a peak of 9.1% in June 2022 to 6.0%, and consequently the Fed has been able to slow its rate hikes. Markets are pricing rate cuts for 2023, and this is bolstering risk assets such as equities and crypto. Crypto has also already priced in a lot of bad news recently, leaving the way open for upside moves.
Before the early 2023 bull run, bitcoin was having a miserable time. This was due to several events, both crypto-specific and part of the broader macro backdrop. You can see the current BTC price on the chart below and its historical progress through 2022.
Moreover, there are ongoing fears that the effects of high inflation and rising interest rates will plunge the world into a recession. Our recession probability indicator remains over 70%. Bitcoin is yet to experience a serious global recession, but we expect one would limit any potential upside in price action. This is because during times of economic uncertainty and weak growth, investors may be more inclined to sell risky assets like bitcoin and seek safer investments such as government bonds.
One exercise is to see how low prices could get were the NASDAQ to suffer a 2000-style crash. After all, earlier in 2021, the bitcoin and NASDAQ correlation reached highs of almost 80%. So where the NASDAQ went, bitcoin followed. The correlation has declined recently, but should it rise again, the historical drawdowns of NASDAQ could be informative.
Back in 2000, the NASDAQ suffered a 78% drawdown. As of November 2022, the NASDAQ is in a 27% drawdown. A repeat of the 2000-style drawdown would put the NASDAQ at 3,500. So where would crypto be if NASDAQ were trading at this level? We estimate a regression between bitcoin/ethereum returns and NASDAQ returns from 2020 onwards. Based on this relationship, we find:
We think bitcoin is a worthwhile long-term investment. However, we also note that bitcoin is extremely volatile. That means it experiences large price movements over short periods. Before investing, you must understand the risks involved: you could lose all or a large portion of your investment. Never invest money that you cannot afford to lose.
However, to invest in cryptocurrency, we must first understand it. Crypto tokens are unlike any traditional asset class. And they are all different. Just because you understand bitcoin, does not mean you know how ethereum works. Our video on bitcoin fundamentals can help you understand how bitcoin prices fluctuate and how to assess trends in important bitcoin metrics.
We suggest paying attention to the long-term macro backdrop when asking yourself, should I buy bitcoin right now? Your exposure to bitcoin needs to be appropriately sized so that you can survive 50% to 80% drawdowns. Drawdowns provide good entry levels for exposure, but we would not go max long in an environment of rising central bank rates and falling global growth momentum.
For trading bitcoin over the next two to four weeks, we are slightly bearish. That means we expect falling prices. However, we think bitcoin is a good long-term investment for the next one to three years and are bullish overall. That means we expect prices to rise in the long term.
As with all investments, the value of bitcoin can rise as well as fall. While it is unlikely that bitcoin will suffer a complete loss of value, investors must be prepared to suffer drawdowns of between 50% and 80%. We recommend small allocations and diversification of your portfolio. Never invest what you cannot afford to lose.
Traditional wisdom says you should buy low and sell high. But whether you should sell bitcoin depends on your investment horizon, risk appetite and financial goals. Although some websites speculate that certain days of the week are better or worse than others for selling bitcoin, we believe that any decision to buy or sell should be based on an analysis of crypto fundamentals.
Smart contract platforms: after bitcoin, the big innovation was to have blockchains that were more programmable. These could host smart contracts or decentralised applications and have allowed the emergence of the metaverse and defi. Ethereum (ETH) is the most popular version of a smart contract platform. As well as ethereum, we also include some key competitors. The constituents of this index are: Ethereum (ETH), Cardano (ADA), Avalanche (AVAX), Solana (SOL), Fantom (FTM), VeChain (VET), Terra (LUNA), EOS (EOS), and Chainlink (LINK). We also include Polkadot (DOT) which allows interoperability between blockchains and the use of smart contracts via parachains.
Although its price is still more than 61% off its all-time high of nearly $69,000 back in 2021, a handful of metrics show Bitcoin is still in relatively good shape, especially when considering the madness crypto has gone through in the past year.
This uptick in activity is likely due to the advent of ordinals, or Bitcoin-based non-fungible tokens (NFTs), which are digital representations of ownership of art, media and collectibles. Since their introduction in January, more than 150,000 ordinals have been created. As a result, the crypto's mean block size has increased by 20.5% and hit an all-time high just shy of 2.5 megabytes.
Lastly, the number of Bitcoin addresses with a non-zero balance also hit an all-time high. Similar to mining difficulty, growth in non-zero addresses has been relatively consistent year after year regardless of market sentiment. As of this writing, there are more than 44.6 million addresses with some amount of the token. Just five years ago this number was at 23 million.
The thinking goes that non-zero addresses can serve as a proxy to gauge network growth and usage. With this number continuing to rise, and at a rate not seen since Bitcoin hit its all-time high in November 2021, there is fair reason to believe that perhaps this crypto winter might just be beginning to thaw.
Like many first-time investors, Milkowski bought digital currencies as they were approaching all-time highs, and as companies were spending tens of millions of dollars on marketing to broaden crypto's appeal.
At the beginning of the pandemic, Michelle Milkowski started investing in penny stocks. A few months later, she bought cryptocurrency for the first time. Kholood Eid for NPR hide caption
Experts say the best time of day to buy cryptocurrency is early in the morning before the NYSE opens since values tend to rise as the day goes on. Be sure to pay attention to slight daily fluctuations across different cryptocurrencies since trends will vary from coin to coin.
Prices are lower when the market is less busy. Although you can trade cryptocurrencies at any time of day, the market is more active during typical work hours and less active early in the morning, at night, and on the weekends.
Generally, cryptocurrency prices start low on Monday and rise throughout the week. When the weekend hits, prices tend to drop until market activity begins the following Monday. Since prices are likely to be at their lowest point following a weekend of low trading activity, Monday is the best time of the week to buy cryptocurrency.
Pricing trends carry on as weeks turn into months, and new trading patterns emerge that raise and lower the price of various cryptocurrencies over time. Since crypto trends are constantly in flux, deciding the best time of the month to buy cryptocurrency will require patience as you get to know the pricing trends of your favorite coins.
For now, the best time to buy cryptocurrency is toward the end of the month. Cryptocurrency prices tend to rise in the first weeks of the month before they collapse and continue to trend downward through the end of the month.
While crypto is starting to trend upward, volatile highs and lows are nothing new in the crypto markets -- and skeptics have long characterized crypto as an empty bubble destined to burst. Critics have called bitcoin, stablecoins and NFTs simply a new digital version of an old con primed to swindle and scam. But investors see the world of digital coinage as a step forward, a kind of "Money 2.0" that will democratize finance and power the metaverse. Amid the seesawing prices and teetering sentiments, one thing hasn't changed: Cryptocurrency remains controversial, risky and wildly volatile.
In simple terms, cryptocurrency is a digital token, ownership of which is recorded on a blockchain, a distributed software ledger that no one controls. This is designed to make it more secure, in theory. bitcoin and ethereum are the two most widely known cryptocurrencies, but more than 18,000 tokens are traded under different names (dogecoin is one famous example).
From the US government's current policy perspective, you're on your own. At this time, the government provides no deposit protection for crypto as it does for bank accounts. This may change following Biden's March executive order, which directed government agencies to investigate the risks and potential benefits of digital assets.
Whether you're using Coinbase, Binance, Venmo or PayPal, you'll be required to provide some sensitive personal and financial information... including an official form of identification. (So much for bitcoin's reputation for anonymous transactions.)
The cryptocurrency's price has plummeted to $32,000 per coin amid a wider stock market selloff. That's a more than 50% dive from bitcoin's high of above $68,000 per coin in November, according to data from CoinMarketCap.
Bitcoin is no stranger to price volatility, evidenced by the fact that just last week, it climbed to $40,000 before falling. Back in 2017, its price hit a high of $20,000 before crashing to below $5,000 the next year. In 2021, its price fell to below $30,000 before surging to November's record high, and seeing a 10% drop in a day is not uncommon for investors with their money in bitcoin and other cryptos, like ether or dogecoin. 041b061a72