Is It Time for Your Cryptocurrency Investment?

Before we talk about you and crypto, let’s just talk about crypto itself. Because before you can even begin pondering a cryptocurrency investment, you need to have a baseline understanding of what crypto is in the first place. Because if you have ever asked “what is cryptocurrency, anyway?” you are far from alone.

So here is your crash course definition of crypto: cryptocurrency is a digital asset that is not tied to or regulated by a banking system or government. They are created via cryptographic (computerized encoding of information) techniques that let you people to buy, trade, or sell these digital assets safely. Cryptocurrencies are protected thanks to blockchain technology, which creates a tamper-resistant record of crypto transactions, effectively tracking who owns what and preventing a crypto coin or token (the common names for units of crypto) from being copied.

If that all sounds complicated, well… it is – let’s try a simpler definition: cryptocurrency is secure digital money. But when we say secure, we mean it’s generally secure against digital theft or counterfeiting, not that it’s necessarily a safe investment. Sure, some people have gotten rich off the stuff, but some have lost big, while still others simply use it like money for buying other things. If you’re treating crypto more like an investment than a currency, you have to know the risks.

Because is there a risk that a cryptocurrency will lose its value? Of course. In fact, any type of crypto could completely collapse. But so could the value of gold, the United States Dollar, New York City real estate, or Impressionist artwork lose all value if enough people decided they simply no longer wanted those things. In that sense, cryptocurrency is just one of the latest things lots of people are willing to treat as valuable, so you might as well see the value in it as well.

Is It Time for Your Cryptocurrency Investment?

Assuming you’re now convinced that cryptocurrency is a legitimate financial commodity, the question remains whether it’s a wise commodity in which to invest. Meaning for you, specifically: with more than half a dozen globally traded cryptocurrencies out there, from the original Bitcoin to the successful upstart Dogecoin to the staid Stablecoins, the viability of crypto in general is well-established.

To determine if now is a good time for your own crypto buy, you need to run through a series of questions.

First, you need to ask yourself the same question every wise investor asks herself or himself before investing a penny in anything: can you afford the loss? In the event a catastrophic collapse of the price of the commodity in which you invest, be it crypto or a car company or cosmetics and so on, could you keep on living the life to which you are accustomed with all that value gone?

If the answer is no, the time is not now for a crypto buy! If yes, let’s keep going.

Second, ask yourself why you want to invest in cryptocurrency. If the answer is merely because it seems cool or interesting or trendy, then you may be coming at this commodity from the wrong angle. Remember that railroads were cutting edge tech and big business once, whereas now rail company stocks are seen as stable but banal. And remember too that trendy does not always portend good things for the future. Anyone who watched the Dot-Com Bubble of the late 1990s or the Housing Bubble of the 2000s knows that. If you can objectively think of crypto as a commodity, though, proceed.

Third question, and perhaps the most important of all: does cryptocurrency fit into your larger investment strategy? If you are hoping to make a quick lump of cash, day trading with better understood assets may be a wiser move. If you are establishing a retirement account you want to be able to count on in a few decades, looking to broadly diversified, stable ETFs and indexes might be wiser. 

But if you are in a sort of middle ground of investing, with an eye not only toward quick returns or a lifelong master plan, now might be the perfect time for you to get into crypto investment. For people in that boat, a sudden drop in value might not be a disaster, as they can wait out a slow build back up, whereas a sudden spike in value may lead to an unexpected – and not even necessary – but very much appreciated windfall that can be drawn out of crypto or reinvested in more.

Hedging Your Bets With a Crypto Buy

All commodities see their prices go up and down, but with crypto the swings can be dramatic. In many cases, dramatic ups and downs don’t mean much if you’re holding your investment for the long haul, as the average value will hold. But as for buying crypto, it can mean a lot if you invest when prices are sky high only to see them resettle lower on average. 

The safe play is to practice what investors call dollar-cost averaging, according to Investopedia. Dollar-cost averaging investment strategy where you divide the total amount of money you plan to invest into smaller chunks and then make your crypto buys at intervals spread across a matter of days, weeks, or even months depending on the size of your buy and the level of attention you can dedicate to the process. 

By spreading out the buy, you can reduce the potential volatility of your purchase, with high prices offset by low prices. That said, if you have been slowly buying (or just watching) a cryptocurrency and you see its price tumble, consider being a bit more aggressive.

When Is the Best Time to Buy Crypto?

OK, so we have established that it may never be the right time for some people to buy cryptocurrency, while for others the right time is as soon as they reach a personal comfort level with so doing. Now let’s briefly move away from you, the individual investor, and talk more broadly and objectively: when is the right time for a crypto investment?

It’s Thursday. Yes, Thursday, and in the morning of that day specifically, according to the financial experts at The Motley Fool. Sure, most Crypto is traded 24/7, and as it’s a global commodity, dates and times are relative here, but when you study enough data, you’ll find the price of cryptocurrencies tends to fall on Thursday mornings, with said timeframe reckoned against America’s eastern time zone.

So there you have it: the best time for your cryptocurrency buy is on a Thursday morning when you feel ready the investment and you stand ready and able for a potential loss. Or a major gain.