Bitcoin was launched in 2008, and it is based on one of the most revolutionary technologies that came into existence. After the creation of bitcoin, blockchain technology, and consensus mechanisms paved the way for a brighter future of P2P exchanges and smart contracts, which later formed an entirely decentralized finance industry.
Since the launch of Bitcoin to the crypto market, it has been tagged as the most volatile crypto asset ever existed and is expected to remain the same in the future. Although the high volatility causes frequent price fluctuations, the most commonly asked question by majority traders is, ‘when is the best time to buy Bitcoins?’
The straightforward answer to this question is when the assets are oversold because the price of the bitcoins sharply decreases during that period.
Is now a good time to buy bitcoins?
It is almost impossible and equally difficult to determine the best time to buy bitcoin owing to its highly volatile pricing. In order to predict the best purchase time, let’s take a look at the previous market cycles and activities.
In 2013, the bitcoin price experienced a steep decrease of 85% right after the bitcoin rally was conducted the same year. In 2017, the bitcoin price increased to the highest, up to $20,000. After that, the bitcoin price experienced a steady decline in the next couple of years, and the cost depreciated to about $3,200. The bear market played a significant role in this price reduction and contributed 80% price reduction. Looking at the bitcoin market cycle of 2020, the price increased to $69,000, which is higher than ever and gradually reduced to approximately $29,000. This cycle may or may not be over but analyzing the past bitcoin prices provides a vague idea on whether the price might fall or not.
In situations where the bitcoin price is highly volatile, it is best to deploy the DCA strategy as you don’t have to spend a lot of money at the same instant to buy a particular Bitcoin. For the unaware, the Dollar Cost Average is a popular Bitcoin trading strategy that enables you to make bitcoin purchase in different time slots. This slits up the total money you are planning to invest into different sections and make purchases periodically instead of doing one large purchase. Some might think, “why DCA strategy?” to have a clear picture of the importance of this strategy, let us take an example. Imagine the Bitcoin value falls from $50,000 to $25,000 in the next week, right after you made a huge purchase. This means that the price has reduced 50%, and if you followed the DCA strategy, you could have saved half the money or purchased double the number of bitcoins with the same amount. This is a widely accepted strategy when it comes to buying bitcoins; this minimizes risk and maximizes the rewards.
What are the factors that determine the Bitcoin value?
In simple words, the value of bitcoins is primarily affected by the total number of people involved in trading bitcoins; this is otherwise called the network effects. Although similar to any other market, the product value is determined by the supply and demand; the bitcoin value is also affected by these factors. Other important factors like block rewards and market sentiment are other factors that define the value of Bitcoins. Experts have estimated that the number of Bitcoins rewards to the traders will reduce by half every four years, which gradually affects the supply in circulation and later affects the market price.
What is expected in 2022?
Considering the extreme volatility, the bitcoin price is expected to spike this year to an all-time high value; the price will surpass $70,000. For this to come true, there should be a potential resistance of $58,000.
Everything mentioned above covers the history of bitcoin prices and factors affecting the price. If the historical market cycle of Bitcoin follows the same path, it is not expected that Bitcoin will be counted as a stable asset any time soon. The best way to proceed is by doing in-depth research by yourself before you make a decision. Remember cryptocurrencies are highly volatile assets.