When is the right time to buy crypto-currencies?
Finding the right time to buy crypto-currencies, especially Bitcoin, to get the best possible return has always been considered the ultimate goal of investors. In this article, we will explore the various strategies for investing in digital currencies and compare the good from the bad practices.
What is the best strategy for investing in crypto?
You would think that making money in the crypto market is easy. In fact, all you have to do is buy the assets at a low price and sell them at a higher price. However, this task is more complex than it sounds. The crypto-currency market is extremely volatile, with prices that can vary quickly and significantly. Indeed, the price of Bitcoin can fluctuate greatly in a short period of time. It's not surprising to see its price move, up or down, by 10% in the space of 24 hours! This volatility can provide opportunities for significant gains, but also for losses that can be irrecoverable. Investors must therefore be able to anticipate price fluctuations and choose the most appropriate investment strategy to maximize their gains while minimizing their risks. In reality, there are two distinct types of strategies for taking a position in the crypto market, each with its own advantages and disadvantages.
Market timing is an investment technique that consists of buying and selling assets according to market movements, with the aim of making gains by exploiting short-term movements. The idea is to buy assets at a low price and sell them at a higher price. If one is able to identify market trends and make informed decisions, one can potentially make significant profits. Ambrosia therefore offers its users the possibility to invest in Crypto Baskets whenever they want, following their own convictions, in a market that is open 24/7.
However, market timing is a very risky strategy as it requires to be right against the majority of the market in order to make profits. If the market's predictions are wrong, the investor can suffer significant losses. This strategy is often associated with trading. Despite the many videos promoting foolproof methods for online trading, only a minority of investors manage to profit from them. Trading requires constant monitoring of the news and quick reaction to market movements, which can be nerve-wracking and requires a great deal of discipline not to be swayed by emotions. According to statistics, only 1 in 10 traders makes money!
As you can see, we are not big fans of market timing at Ambrosia. That's why we strongly recommend our clients to go for a passive and long term strategy: "buy and hold".
Recurring purchases and patience
The recurring purchase, also called "Dollar Cost Average (DCA)" is an investment method that consists in smoothing its investment over time, regardless of the asset's price. This strategy is simple: just buy a fixed amount of crypto-currencies on a regular basis (every month for example), regardless of the price and valuation of the asset.
Buying crypto on a recurring basis offers many advantages for medium and long-term investors. First of all, this method allows you to invest without having to worry about whether it's the right time to buy. Indeed, purchases are made at regular intervals, which avoids the risks related to market timing. No more stressing about whether or not you are taking advantage of the market's opportunities!
In the event of a drop in prices, the DCA allows you to accumulate more assets for the same amount invested, which smoothes the average purchase cost and reduces the impact of volatility on your portfolio. In the event of a rise, the value of the capital invested increases progressively, even if the amounts invested decrease. This method allows you to take advantage of market increases over the long term, without having to try to anticipate market movements. Thus, whether it goes up or down, the investor is a winner!
Finally, the DCA is an investment method accessible to all, because it does not require a large starting capital. The amounts are invested progressively, which allows to start investing even with small amounts. Ambrosia also offers to invest in its various Crypto Baskets through programmed investment plans starting from 100€ per month.
In short, a recurring purchase strategy must necessarily be coupled with a holding strategy. This consists simply in waiting for a long period of time until your cryptos increase in value. In the jargon, this method is often called "HODL", a reference to "hold". To this end, Ambrosia is registered as a Digital Asset Service Provider (PSAN) with the AMF for the service of holding digital assets.
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