If You Haven’t Already Invested In Crypto, Is Now The Time?

The crypto investment topic is a very popular one consistently discussed by members of the community. While some wonder which asset is the best option, others debate what percentage of an investment portfolio is ideal for crypto allocation. However, one of the most popular discussions by expert and inexperienced crypto community members is about timing. Specifically, when is the right time to invest in cryptocurrency?

Some people decide to invest in cryptocurrencies based on the potential of specific assets. This is because some assets historically perform better than others. However, others combine multiple factors, especially for assets in their pre-launch phase. For example, a well-documented phenomenon known as the Coinbase effect suggests that assets newly listed on the Coinbase exchange can spike more than 90% in a short period. This is why some investors check through Coinbase future listings to find new cryptocurrencies likely to bring heavy rewards to investors in the period after the official exchange debut. These assets are usually cheap and offer several advantages, including multi-chain functionality, staking opportunities with impressive APY figures, and other specific perks. Whether or not an asset has a trusted track record, investors must consider multiple factors before deciding on the best time to invest. 

The Current Crypto Market So Far

The crypto market has grown substantially in the last few years, with even more significant growth in 2024. For instance, Bitcoin has had a remarkable year, with events that have contributed significantly to its price action. Despite a more than 10% crash over the last month, the world’s largest cryptocurrency by market cap has already returned more than 20% since January and over 73% in the last year. Bitcoin also hit a new all-time high (ATH) of $73,700 in March, in addition to the halving event that happened in April. Months earlier, the United States Securities and Exchange Commission (SEC) approved spot BTC exchange-traded funds (ETFs) after over a decade of rejections.

The boost in Bitcoin was also seen in the rest of the crypto sector. For instance, the SEC also surprisingly approved spot Ether (ETH) ETFs. Furthermore, several other assets, like Solana (SOL) and Avalanche (AVAX), have had impressive gains this year. At one point, SOL’s 24-hour trading volume hit $23.39 billion, about ten times Ethereum’s figure. There are also speculations that the SEC will approve spot ETFs for other assets, with SOL and XRP currently the most likely, according to reports. Although regulatory problems still exist in the broad crypto market, the SEC’s approvals indicate a growing regulatory acceptance of the crypto sector.

Factors to Consider 

The cryptocurrency market is known for its extreme instability, which makes it difficult to predict. Prices can swing heavily in short periods, making crypto investment a high-risk and high-reward endeavor. However, there are a few factors that can help simplify investment decisions.

The first thing to consider is the current state of the market at the time of the investment, as some periods are more volatile than others. For instance, Bitcoin began 2021 at about $29,000 and hit $69,000 by November, a 137.9% increase to a new ATH. However, it crashed 33% to $46,000 by the end of December. In 2017, XRP jumped 38,000% from $0.006 in January to $2.30 in December. However, the following year, it fell from $2.3 in January to $0.36 in December. 

Another major factor is the current state of the market regarding technological innovations and general adoption. For instance, while Bitcoin has had a good year for regulatory reasons, other cryptocurrencies and blockchain networks are also gaining attention for technological innovation. There also is a growing relationship between blockchain technology and intelligence as both industries simplify and redefine the world’s understanding of data management and security. 

Investors should also consider adoption rates in the general market and for specific cryptocurrencies. As the industry’s popularity increases, the likelihood of higher adoption also rises. Today, several major organizations are significantly working on crypto support and accepting digital asset payments. Popular options include Tesla and Microsoft. Cryptocurrency adoption, in a bullish market, may also extend to other popular applications, such as decentralized finance (DeFi) and crypto gambling.

In addition, many governments are considering the possibility and potential use cases of central bank digital currencies (CBDCs). According to a World Economic Forum (WEF) study, 98% of all central banks are exploring CBDCs, with some of these national currencies already launched.

Investment Strategies Regardless of Volatility

Anyone can enter the market anytime and make investment decisions that may vary by the amount invested or the specific crypto chosen. Regardless of time, users can invest in cryptocurrencies by applying these strategies:

- Long-Term Investment: The long-term strategy involves buying and holding an asset for a long time until it rises. This method allows investors to take advantage of an asset's long-term growth without worrying about short-term market volatility. Cryptos like BTC, despite heavy price movements along the way, are known to provide substantial returns for investors over long periods. People investing long-term may be willing to enter the market at nearly any point.

- Short-Term Investment: This method requires investors to actively monitor the market to buy cryptocurrencies at low prices and sell them when they spike. Investors using the short-term strategy must make very careful decisions multiple times in short periods to avoid losing funds to sharp plunges. Short-term investments usually require a deeper-than-average understanding of market trends.

- Dollar Cost Averaging (DCA): The DCA strategy can be long-term or short-term. People who prefer this approach regularly invest a fixed amount of money into cryptocurrency regardless of price. DCA does not consider volatility or other temporary market factors but allows investors to average their investment costs. This is an effective strategy for inexperienced investors who do not understand the market, or cannot monitor it properly to make educated decisions.

Challenges and Risks

All cryptocurrency investors, regardless of experience, portfolio strength, or chosen strategy, should consider a few challenges and risks to crypto investment. Despite technological innovations, security remains a significant concern in space. The crypto industry is still rife with successful attempts at fraud and hacks that cost users several million dollars worth of their assets each year. Around mid-July, popular Indian crypto exchange WazirX lost over $230 million, about 45% of its assets, to a cyber attack. According to a report from security service firm Immunefi, the crypto industry has lost more than $473 million to hacks and rug pulls this year.

Another concern plaguing the industry is regulatory uncertainty. Unfortunately, despite significant strides and achievements in the global crypto space, crypto investment suffers considerable regulatory risks as many governments are still unsupportive of decentralized digital assets.