The train did not go away: why it is not too late to invest in crypto-currencies


We talk about the strategy of "investing in spite of" and the theory of market cycles.

Each of us would like to buy bitcoins (Bitcoin) in 2013. Everyone knows perfectly well that every dollar invested in them would bring a fortune today.

Alas, the train left. The fever passed. The agiotage subsided.

These phrases were heard by everyone. Probably, you yourself think that it is too late to buy a crypto currency. After the astronomical growth of bitcoin in December 2017, investing in it now is pretty stupid, is not it? Bubble burst, the market has become a bear, putting pressure on prices.

But what if we tell you that now is the best time to invest in crypto-currencies?

For those who missed their chance last year, this is a real opportunity to enter the market. The hype in the media has subsided, we experienced a three-month decline (long by the standards of the crypto-currency market), prices returned to the levels of November (before the December rush).

But, perhaps more importantly, how market sentiment is changing. Over the past few weeks, there has been a clear shift in relation to digital currencies.

Look at the bitcoin schedule from January 2017. There is a sharp surge in December / January and a subsequent series of falls. Since then, the price has twice reached a local minimum - once in February, and once - in mid-April.

The rate of BTC / USD from January 2017 through May 2018

Now let's compare it with the classical market cycle and related psychology.

What happened to bitcoin and the crypto-currency market over the past six months is exactly the same as it was.

In November, we witnessed an unprecedented optimism, in the beginning of December there was a frank excitement in the market. As it grew, the third phase of the cycle coincided in time with Christmas and New Year. They talked about crypto-currencies in the news, in bars, at family dinners and even during a festive Christmas dinner.

Let's move to February. The negative mood began to prevail on the market, the memories of HODL have lost relevance. The market continued to fall, and the crypto-exchange community began to look for the guilty. Mt. Gox sold a significant proportion of bitcoins! China is embittered at crypto-currencies! Futures for bitcoins expire! Some South Koreans were involved in insider trading!

Some of these events have actually aggravated the fall, but no one will ever know to what extent. But if you take a step back and see what really happened, it becomes clear: there was a normal market correction that had been brewing for a long time.

What constantly goes up, one day must go down.

So why is the right time to enter the market now?

The balance of fear and greed

Quoting the great Warren Buffett, be afraid when others are greedy, and be greedy when others are afraid.

That is why now is the right time to buy crypto currency. The worst moments of correction have passed, and fear in the market is just beginning to weaken.

When people are afraid, they massively get rid of their positions and thereby exert pressure on prices. When this fear subsides, it is replaced by the fear of missing the opportunity (FOMO), which leads to higher prices. At the most basic level, these two fears underlie all market movements.

The key to success in the crypto world is the use of crowd emotions to choose time to market and understand the market cycle.

Investing in spite of

This style of investing is essentially a solution contrary to the opinion of the crowd.

"A counterparty investor enters the market when others are pessimistic, and asset prices are lower than their intrinsic value."

Investing in spite of - one of the best strategies in the crypto currency trade, because the market is still young and is subject to significant influence of news, emotions, irrationality, fears, FOMO and agiotage.

The counterpart investor is convinced that excessive emotions lead to excessive pressure on asset prices, making them very profitable to buy. It is for this reason that traders are so fond of repeating that it is necessary to buy on drawdowns.

When investing money, when others are afraid, you benefit from their fears and take a suitable position for further growth.

Market cycles and bubbles

All asset classes pass through market cycles. Shares, bonds, real estate are experiencing periods of ups and downs. (Australia, for example, recently went through mining and housing booms).

The crypto-currency market (like any other one) also experiences cycles, only they pass much faster. In one year 2017, three cycles occurred. In each of them, bitcoin first grew and then fell (from $ 800 to $ 2,500 in May, from $ 2,000 to $ 4,500 in August, from $ 3,000 to $ 8,000 in September).

Crypto currency is in the bubble. However, in this case, the "bubble" is only a way of describing the market cycle, a series of ups and downs. The only difference is that the crypto-currency market is going through a cycle every few months, while in the fund market it can take 10-15 years. Take a look at the history of the American Internet bubble:

Notice the similarities?

If you look at the bitcoine graphs and market ups / downs, it becomes clear that at the moment we are at the end of the cycle. Guess what happens at the end of the cycle? That's right, everything is repeated again!

Still do not believe it?

Those wishing to rely on something more specific than market sentiments can pay attention to technical indicators and specific figures. As mentioned earlier, we experienced a couple of local lows in February and April. Currently, the third week of growth is in progress.

Daily trading volumes of bitcoin are steadily growing. April 10, this figure was $ 4.5 billion, today it has grown to about $ 8 billion. For comparison, on November 13, the volume of trading in BTC was 9 billion, on January 6 (at the peak of the bubble) it jumped to 22 billion. Do you notice the similarities?

conclusions

Crypto-currency is not suitable for all investors, but if you were going to enter this market, then now is the right time for it. The journey will not be easy, but exciting. Returning to our metaphors, the bitcoin train began to move, but did not leave the station. In it you can still jump. Dismiss doubts and run while there is time!

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