Is now a good time to buy Bitcoin, Ethereum and other cryptocurrencies?

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Coinmonks

5 min readMar 29, 2022

*Please note that any information in this article is not financial advice and for entertainment purposes only.

The cryptocurrency asset class is not for the faint-hearted, with volatility always lurking behind the shadows to haunt new and seasoned investors. With present geopolitical conflicts potentially affecting global markets and global inflation rates rising dangerously high, the macroeconomic conditions are definitely not ideal for investors wanting to gain exposure to the cryptocurrency asset class. Given the recent uncertainties and risks of policies and conflicts, is now a good time to invest in your favourite cryptocurrencies? Take note that I will focus on long-term investors, particularly those who want to buy and hold and are just looking for good entry points.

Before we decide whether now is a good time to buy cryptocurrencies, let us first get things straight and figure out if you should invest in it in the first place. The golden rule is, only afford to invest what you are willing and able to lose. Let me try and outline a few reasons why.

If you are someone who has a lot of financial commitments (maybe you need money to pay for college or down payment for your first apartment), you may want to reconsider your options. If, god forbid, you place your hard-earned cash that is needed elsewhere to invest in cryptocurrencies and the next day bitcoin crashes 33% in a week (which is exactly what happened in May 2021), you are going to be in a tight spot. Therefore, always take a good look at your financial commitments before placing extra cash (emphasis on the extra) into cryptocurrencies.

Now, you’ve painstakingly looked through your financial circumstances and have come up with an extra $1000 which won’t make a difference to your life if you lose it all. Great! Should you invest this $1000 right now?

The answer is, it depends on whether you already have a position in place. Let’s first talk about the case where you do. If you already have a position in Bitcoin, Ethereum or any other cryptocurrency, then you may want to take a backseat and accumulate a cash position. Right now, the global macroeconomic situations are far from ideal, and needless to say, the recent price developments have been nothing but downwards. Therefore, it may be a good idea to take a backseat and be patient. If cryptocurrencies suddenly reverses tomorrow, good for you, your existing position will shortly go into profits. If cryptocurrencies continue to fall, it would have been a mistake to buy now. Instead, it may be safer to wait for some signals that indicate a price reversal. If you had bought any bitcoin on the way down from $69000, you must be kicking yourself right now. Instead, wait for prices to turn around and buy on the way up. You may miss the bottom, but you didn’t miss the ride.

That being said, if you do have a long-term horizon on the market, then it is perfectly reasonable to set price targets and buy as prices continue to fall and hit those targets. You can also divide your cash stack into small increments and invest them one increment at a time. For instance, if you plan to have $1000 invested in Bitcoin within a year, you can divide your $1000 into batches of $50, with $50 invested into Bitcoin every week. This is famously known as the Dollar-Cost-Average strategy (or DCA). If you had DCA-ed into Bitcoin anytime before 2021, you would be one happy person. In the long run, this strategy will work out, as long as you believe based on your diligent research that the cryptocurrency you are buying is a quality one with high potential. Just remember to have patience and time will always be on your side.

However, if you do not have a position in any cryptocurrencies and are looking for a good time to enter, then anytime is a good time to make your first investment. As world-renowned investor Warren Buffet famously said, time in the market is better than timing the market. It is usually impossible to time perfect price tops and bottoms, which renders any significant effort to do so unjustified and potentially misleading. Just make sure that your first buy is not a significant amount of your cash position. Zooming out and looking in the long-term, if you bought the market top in 2017, it would take you less than 3 years to break even, and that is the worst case scenario. Therefore, it may be better to open a small position and set lower price targets for future entries than waiting for future entries at lower price targets without opening a position. If the prices go up, congratulations, you have made your first profits. There is no guarantee that prices will fall to your price target, and you run the risk of shifting price targets everytime cryptocurrencies fall further. When the cryptocurrency prices finally reverse, you are left with nothing but sore eyes from staring at your charts. As such, opening a position regardless of prices will give you a ticket to the game that you won’t want to miss.

Given that, should you buy just any cryptocurrencies? Not really. Right now, the cryptocurrency class is undeniably in a bear market on the weekly timeframe. As such, it may be wise to avoid smaller-cap altcoins and concentrate on less volatile cryptocurrencies such as Bitcoin or Ethereum. With Bitcoin prices below major indicators like the famous Bull Market Support Band and global complications turning off the risk appetite for investors, the timing is definitely not ripe for the cryptocurrency asset class to grow in the short term. Since Bitcoin and Ethereum have much larger market caps than smaller altcoins, less money is required to move the prices of altcoins compared to Bitcoin and Ethereum. A 20% drop in Bitcoin prices can be coupled with 50% drops in smaller cap altcoins (Just look at how Binance Coin, the third largest cryptocurrency by market cap in May, dropped almost 70% when Bitcoin “only” dropped nearly 50%). Therefore, with no signs of turnaround in sight just yet, if you have to buy a cryptocurrency, it may be wise to focus your attention on less risky cryptocurrencies, namely Bitcoin and Ethereum. This will help you avoid larger losses if prices drop further and allow you to still make handsome gains if prices start seeing signs of life again. It is not too late to switch to more riskier coins then.

In conclusion, the cryptocurrency asset class is a volatile one that may not be suitable to all investors. Before investing in a cryptocurrency, ask yourself honestly if you do have the heart to take in the volatility. Beware that it is easier said than done. Then, decide if your financial situation and obligations allow you the liberty to invest in cryptocurrency. If you still want to invest, please do your own research and before making any decisions. It is important to learn more about the asset class as it is still an up and coming one with huge upside potential and accompanying risks. Invest intelligently and you will ultimately prevail.

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Is now a good time to buy Bitcoin, Ethereum and other cryptocurrencies?

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