To make a profitable investment, buy when prices are low and sell when prices are high.
That conventional wisdom sounds simple – but it’s not as simple to invest profitably as it sounds. That’s especially true in the world of crypto investing. Market volatility sends cryptocurrency values soaring and plummeting dramatically with no warning and no obvious cause. The crypto you bought last week for 100 € may be worth 1,000 € today – or 10 €.
That’s what makes trading at a cryptocurrency exchange so challenging for day traders and others who expect to time the market – to make purchases and sales according to predictions about changes in cryptocurrency values. Cryptocurrency prices rise and fall according to market conditions, rumors of upcoming government regulations, tweets from celebrities, and sometimes for no discernible reason. Timing purchases to coincide with high and low prices is a major challenge.
A Broader Perspective
That’s why Kriptomat is among a small number of cryptocurrency exchanges that encourage investors to take a long view when considering when to buy a cryptocurrency and provide tools to support long-term portfolio management.
Price charts are all peaks and valleys when you look at the short-term highs and lows. But when you change your focus to look at a year, two years, five years, or longer, the crypto world’s infamous volatility is smoothed out. It’s easy to see long-term trends. And for most cryptos, the long-term trend is upward.
Consider the Bitcoin price record. Over the past 10 years, the value of Bitcoin has risen at an astonishing compound annual growth rate of 132.2%. Gold achieved a 1.2% CAGR over the same period. The Standard & Poor 500 earned a respectable 16.6% CAGR for investors, while those who purchased Dow Jones Industrial average index funds earned a CAGR of 11.41% on their investments.
In any given one-week or one-month period, Bitcoin’s volatility could lead investors to sustain big losses as easily as big gains. But this volatility is played out against a long-term trend of rising prices. If you bought 1,000 € of Bitcoin 10 years ago, you would be wealthy today.
The long-term view empowers you to follow the advice of finance-industry gurus like Berkshire Hathaway CEO Warren Buffett, who say that investments should be based on time in the market instead of timing the market. Buffett famously claims to have built his fortune without making predictions about the prices of individual stocks.
One way to follow Buffett’s advice is to take advantage of the Kriptomat Recurring Buy feature, which allows investors to build portfolios gradually by making small purchases according to a regular weekly or monthly schedule. Portfolios grow gradually over time into nest eggs that come in handy when it’s time to retire, purchase property, or pay for an expensive university education. It means you can start investing immediately, even if you haven’t saved up enough money to make a major purchase. Over time, small investments build into major crypto holdings.
Calculating Returns
The overall trend of the crypto market has historically been upward when considered in multiple years. Yes, individual coins and tokens lose value. There are periods of weeks and months when prices may be below what you paid. But in the long run, the historical record illustrated by crypto graphs and price charts demonstrates that purchasing digital assets and holding them for the long term is a winning strategy for Bitcoin and many other cryptocurrencies.
Plotting the Trends
What would a 100 € investment in Bitcoin – or Shiba Inu or Ethereum or any other cryptocurrency – be worth if you had made your purchase a week ago? What would the cryptocurrency value be if you made your purchase a month ago? A year ago?
You could generate a series of price charts and build a spreadsheet to perform calculations to find out. Or you could visit the handy Kriptomat what-if calculator, which performs the calculations based on figures that are constantly updated on a 24/7 basis.
Kriptomat provides easy-to-understand results for 350+ cryptocurrencies. You can see at a glance what a 100 € investment made yesterday, a week ago, two weeks ago, a month ago, or a year ago would be worth today. This data highlights long-term trends and can help identify cryptocurrencies that may be over-hyped or under-appreciated.
They also highlight the value of spending time in the market instead of trying to time the market to make trades according to predictions about highs and lows. And they show that even when crypto prices are down, they may be experiencing a short-term correction in an overall upward trend when viewed in the long term.
When is the best time to invest? As Warren Buffett says, “The best time to invest is several years ago. The second-best time is now.”