Cryptocurrency has become a front-page staple in financial news, especially as investment activity has surged during the pandemic. The latest update grabbing headlines is that Bitcoin is once again breaking its own records. On October 20th, its price topped $66,000 for a new all-time high. Barron’s attributed the feat to the launch of the first-ever Bitcoin ETF in the U.S., which merited celebratory pump activity from crypto enthusiasts. The launch further established crypto as a legitimate valuable asset and piqued the interest of some who have traditionally been crypto skeptics.
With this news in mind, many who aren’t already holding cryptocurrency might be wondering: Is now the right time to buy Bitcoin?
Why you should wait to buy Bitcoin?
The short answer to the question of whether now is the time to buy Bitcoin is: No. Typically, when an asset’s price reaches an all-time high, it’s wise for investors to wait before they buy-in. One common saying in investment (no matter the market) is “buy the rumour, sell the news.” To purchase an asset at an all-time high, by contrast, is very much buying the news. It means getting in only after the value has spiked to the point of creating headlines. And usually, in the short term, such a spike is followed by at least a modest downturn.
This is why experts advise curbing your fear of missing out (FOMO) amidst the Bitcoin hype. Behavioral finance expert Shari Greco Reiches explains that FOMO is simply an instance of an investor “panic buying.” This means making an emotionally driven investment decision rather than one that is backed by data and strategy.
Rather than succumbing to FOMO or emotional impulse, try to take a step back and consider this: Bitcoin, much like any other cryptocurrency, is volatile. If you look back on FXCM’s breakdown of Bitcoin activity, you’ll quickly be reminded that the asset has a long history of wild swings. For instance, it climbed to $20,000 late in 2017 only to decline sharply in the following months. More recently, Bitcoin’s price rose from $29,000 at the start of this year to new highs in April, before slowing down for a good portion of the summer season. All of this means that there is a very high potential for Bitcoin’s value to sink again. This would in turn create more favorable conditions for would-be buyers looking to get in on the market –– particularly given that Predictions from Bloomberg indicate that Bitcoin could yet soar to $100,000 by the end of the year. However, there is still a lot of time before December.
To sum everything up, buying Bitcoin at or near its all-time high may not be the best strategy. More often than not, experience and experts tell us it’s best to wait for a dip in the market. Meanwhile, if you already have a little Bitcoin stashed away, here’s a crucial piece of advice from NextAdvisor: Do nothing. If your strategy is built for the long-term, this latest peak might just be one in a series of fluctuations leading toward greater gains over time. You don’t have to capitalize just yet.
If you’re still looking for an entry point in the crypto market though, it’s best to keep an eye on things and wait for more of a lull.
This post was written by Ellis Burgess