Bitcoin has performed poorly after it peaked at an all-time high in November 2021. The value of bitcoin crashed from almost $70,000 to below $18,000 as concerns about a recession rose. At the time of writing, BTC is trading at about $20,000, giving it a market cap of over $377 billion.
Bitcoin has struggled as investors worry about the rising interest rates, soaring inflation, and the fact that governments have reduced their fiscal stimulus. Therefore, in this article, we will look at some strategies to help you determine whether to buy Bitcoin or not as it consolidates at $20,000.
Some of the strategies highlighted are the use of cryptocurrency trading bots, technical analysis, and chart analysis.
1. Buy Bitcoin Using Technical Analysis
The most common strategy to know when to buy Bitcoin is using technical analysis. This is a method of analysis that involves using technical indicators like moving averages and Bollinger Bands.
One way to use moving averages is to find when there is a crossover between a long and a short one. For example, you could have a 25-day and a 50-day moving average on a Bitcoin chart. In this case, when the two make a crossover, it can be a sign that buyers are coming back in and that the coin will keep rising.
Further, you could use oscillating indicators that identify oversold and overbought levels. Examples of popular oscillators are Stochastics, Commodity Channel Index (CCI), and the Relative Strength Index (RSI).
2. News and Macro Events
Additionally, you can also determine whether to buy Bitcoin by just looking at key macro events. For example, you can look at economic data on inflation and the labor market. In most cases, high inflation and low unemployment rate usually push the Federal Reserve to embrace a more hawkish monetary policy.
In most cases, an extremely hawkish Fed usually pushes the prices of Bitcoin and other risky assets sharply lower. For example, Bitcoin declined sharply in 2022 as the Federal Reserve decided to hike interest rates and end its quantitative easing.
Therefore, you should always focus on the latest macro events and news from the Federal Reserve.
If the hike turns dovish, it could be a good sign to buy Bitcoin. In addition to the Fed, some fiscal policies like stimulus packages can have a positive impact on BTC prices as well. For example, Bitcoin prices jumped during the pandemic as the Federal government provided stimulus worth trillions of dollars.
3. Buy Bitcoin Using Crypto Charts
Chart analysis is another approach towards determining whether to buy Bitcoin. It is a process where you study charts and identify chart patterns. There are two main types of patterns: reversal and continuation.
Reversal chart patterns indicate that a coin’s price will change direction while continuation patterns indicate that the existing trend will go on. Examples of reversal patterns are head and shoulders, double and triple top, and rising and falling wedges.
On the other hand, some of the most popular continuation patterns are bullish and bearish flags and cup and handle.
In addition to these, there are candlestick patterns that can tell you when to buy Bitcoin. Examples of bullish candlestick patterns are hammer, doji, morning star, and bullish engulfing.
It is also possible to incorporate the use of trading robots in chart analysis. For example, some robots are based on trend-following analysis. In this case, a bot can be designed to analyze and find a chart pattern like a bullish or bearish flag. As a result, the bot will initiate a bullish trade when it spots the pattern.
4. Using Cryptocurrency Trading Robots
A popular method for determining whether the time is right to buy Bitcoin is to use trading robots. A robot, also known as an expert advisor, is a piece of software that analyzes chart patterns and then determines whether to buy or short a cryptocurrency.
Trading Robots are created by combining several approaches to the market. Some are created to analyze the market using technical indicators like moving averages, relative strength index (RSI), and the relative vigor index (RVI). These indicators conduct analysis and predict whether an asset’s price will rise or fall.
Other trading bots are designed by combining technology aspects like artificial intelligence (AI) and big data analytics. For example, a bot will scan the market and identify positioning patterns among participants. It will then analyze this data and predict whether it is ideal to buy or sell BTC.
There are several benefits of using trading robots like Bitcode Prime in the crypto space. First, these bots work throughout the day. Further, these bots have different risk management tools like stop-loss and take-profit.
Robots have some disadvantages as well. For example, some bots may not perform well when market conditions are too volatile. Some are created to do well in periods when markets are trending while others are built for volatile markets.
Additionally, not all crypto trading robots accept all cryptocurrencies. Some of them just allow you to only trade Bitcoin while others allow you to trade some other different cryptocurrencies and assets.
Furthermore, depending on the market conditions, some trading robots can forecast when is the best time to buy or sell better than others. For these reasons, you should always initiate research before choosing your robot, as not all trading robots operate in the same way and each has a unique trading strategy.
5. Portfolio Trackers
Portfolio trackers are an absolutely useful tool! Portfolio trackers are the most commonly used crypto tool and will assist you in keeping track of your portfolio. You can see the total value of your investments, the 24-hour change in value of your portfolio, and the performance of individual coins in your portfolio all at a glance.
If you notice that one coin is hurting your portfolio, you can decide what to do about it. It will help you to mitigate risk and maintain profit generation. It will help protect you from overholding rising assets, to continue generating profit.
For example, if you want your BTC holding to always be worth 10% of your portfolio, but BTC rises in price, increasing its worth to 30% of your portfolio, you can rebalance your risk by selling some eth and book some profit right away.
How to identify the right time to buy or sell Crypto?
A common question among most traders and investors is on how to identify the right time to buy and sell cryptocurrencies. In this article, we have looked at some of the most popular strategies to use.
While they are not all perfect approaches, they will provide a good way to determine when to buy or sell BTC and other coins. It is always recommended that you use risk management strategies like having a stop-loss, reducing leverage, and embracing good position sizing strategies.