Markets are scary right now, and while the situation is likely to get worse, that doesn’t mean investors have to sit out and watch from the sidelines. In fact, history has proven that one of the best times to buy Bitcoin (BTC) is when nobody is talking about Bitcoin.
Do you remember the 2018-2020 crypto winter? I do. Hardly anyone, including mainstream media, spoke positively or negatively about crypto. In this period of sustained downtrend and protracted sideways trend, savvy investors amassed to prepare for the next uptrend.
Of course, nobody knew “when” this parabolic advance would happen, but the example is just to illustrate that crypto could be in a crab market, but there are still great strategies to invest in Bitcoin.
Let’s look at three.
Accumulation via dollar cost averaging
It helps to be price agnostic when it comes to investing in assets for the long term. A price-agnostic investor is immune to fluctuations in value and will identify some assets they believe in and continue to add to their positions. If the project has good fundamentals, a strong, active use case, and a healthy network, it makes more sense to just put the dollar cost average (DCA) in a position.
Take this chart of DCA.BTC for example.
Weekly dollar cost results averaged in bitcoin. Source: DCA.BTC
Investors who auto-bought $50 in BTC weekly for two years are still making profits today, and thanks to DCA there is no need to trade, watch charts, or experience the emotional stress that comes with trading .
Trade the trend and go long extreme lows
Barring a stable, reasonably large dollar cost average, investors should build a dry powder war chest and just sit on their hands and wait for generational buying opportunities. Entering the market when it is severely oversold and all metrics are extreme is usually a good place to open spot longs, but with less than 20% of your own dry powder.
When assets and price indicators are two or more standard deviations from the norm, it’s time to look around. Some traders zoom out to a three-day or weekly timeframe to see when assets correct to higher timeframe support levels or previous all-time highs in signs to invest.
200-week moving average heatmap for bitcoin. Source: LookIntoBitcoin
Others are looking for price to turn key moving averages like 118 DMA, 200 WMA and 200 DMA back to support. On-chain fanatics typically follow the Puell Multiple, MVRV Score, Bitcoin Pi indicator, or Realized Price indicator to see when extreme multi-year lows are being hit as a sign of when to buy.
In any case, opening spot longs during extreme sell-offs usually turns out to be a good swing trade or even an entry point for a multi-year position.
Related: Who moon? Probably Not Soon: Why Bitcoin Traders Should Embrace the Trend
Do nothing until the trend changes
Trading during a bear market is difficult and capital and portfolio preservation is a top priority. For this reason, the best thing for some investors to do is simply wait for confirmation of a trend reversal. As the saying goes: “The trend is your friend”. Everyone is a genius and an excellent trader during a bull market. So if that was you, then wait for the next bullish trend and then become a happy genius.
Downtrends, consolidation and bear markets are notorious for dismembering traders and reducing one’s portfolio size, so trading against the trend is unwise unless you have a positive PNL method for trading during bear trends and some skill when selling short.
It is important for crypto investors not to live in a vacuum and keep an eye on the stock markets. Crypto traders tend to only focus on crypto markets, and that is a mistake as stock markets and BTC and Ether (ETH) prices have shown a strong correlation over the past two years. In the charting suite of one’s choice, it would be wise to keep the S&P 500, Dow Jones, or Nasdaq charts alongside the daily charts of BTC or ETH.
Bitcoin correlation to stock markets. Source: TheBlock
In the recent trend reversal, BTC’s price action was the canary in the coal mine, which began chirping louder and louder as the Federal Reserve stepped up its intent to hike interest rates. It’s easy to be fooled by the tiny movements on Bitcoin’s four-hourly and daily price charts, and one could easily be lured into some hefty positions if one believes that BTC is about to reverse.
Keeping an eye on the market structure and price action of the major stock indices will provide crucial insights into the strength and duration of any uptrend or downtrend Bitcoin could exhibit.
This newsletter was written by Big Smokey, author of The Humble Pontificator Substack and resident newsletter writer at Cointelegraph. Every Friday, Big Smokey will be writing market insights, trend guides, analysis and early bird research on potential emerging trends in the crypto market.
Disclaimer. Cointelegraph does not endorse any product content on this page. While we aim to provide you with all the important information we could obtain, readers should do their own research before taking any action regarding the company and take full responsibility for their decisions, nor can this article be considered investment advice.
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