When to buy Bitcoin: A Guide To Buying At the Right Time

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So you’re wondering when to buy Bitcoin?

Choosing the right time to invest in Bitcoin is crucial.

It can make the difference between life-changing financial returns, or hefty losses.

In this guide, we share our learnings with you on timing an investment in Bitcoin correctly.

Please keep in mind that this content is not investment advice, always do your own research.

Bitcoin’s price action

Bitcoin has been the best performing asset of the last decade. However, that astonishing performance comes at a cost: volatility.

Throughout its journey from less than $0.01 per coin to a current all-time high of $20,000 per coin, Bitcoin went through numerous 40%+ flash crashes and extended bear markets where the currency lost up to 80% of its value.

This has resulted in the media and big profile investors chanting the “collapse of Bitcoin” on multiple occasions, ignoring the fact that Bitcoin has always rebounded stronger after every single correction.

Although the novice observer may not see any specific pattern in these wild price swings, Bitcoin is known to move in 2 well-studied cycles: a multi-year cycle, and a multi-month cycle.

Both cycles will be analyzed in the sections below. If you are interested in holding for multiple years, then the section titled “When to buy Bitcoin as a long-term holder” will be of interest for you.

If you only want to get involved as a short-term speculator, then scroll down to the section about when to buy Bitcoin as a short-term speculator.

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When to buy Bitcoin as a long-term holder

So far every investor that bought Bitcoin and held it for at least 2 years is in profit with his holdings.

Due to how incredibly effective the “Buy and Hold” strategy is in Bitcoin, Bitcoiners have coined a specific term for it: “Hodling” (note that the typo is intentional).

“Hodling” is a great option for investors that want to get exposure to Bitcoin for the long-term, and that don’t care about short-term price swings.

A good way of increasing the effectiveness of this strategy is by employing a method called “Dollar Cost Average” (DCA).

Instead of buying all your desired Bitcoins at once, when DCAing you would split your investment in 12 chunks, for example, and buy 1 buy Bitcoin with 1/12th every month for 1 year.

This way, you avoid the risk of buying all your Bitcoins at a potential top.

Now that you know what “Hodling” is all about, let’s explore the main Bitcoin price catalyst that long-term holders should be keeping an eye on.

The largest Bitcoin rallies so far have always coincided with the “Bitcoin Halving” events, which occurs every 4 years.

Bitcoin Halvings are bullish price catalysts because, as the name suggests, the yearly Bitcoin inflation is halved.

Hence, as after each Bitcoin halving less BTC ends up hitting the market and demand remains unchanged or even increases, a price surge follows.

Historically, buying approximately 1 year before the halving as proven to be the best time to buy Bitcoin.

On the other hand, buying 2 years before the halving has so far proven to be the worst time to buy Bitcoin as it usually coincided with a major price top.

Technical analysis tip

A simple “Technical analysis” (analysis of price chart patterns) that can minimize your risk drastically as a long-term holder is looking at the 200 days and 50 days “Moving Averages”.

A moving average calculates the average price of an asset over a certain time period (for example, 200 days or 50 days).

moving averages trading bitcoin

A simple rule of thumb is that if the 50 days Moving average is above the 200 days Moving average then the price trend is bullish.

If, on the other hand, the 200 days Moving average is above the 50 days Moving average then the price trend is bearish and you might want to hold off with your Bitcoin investment.

When to buy Bitcoin as a short-term trader

As a short-term Bitcoin trader, the long term value proposition of Bitcoin is by far not as important as seasonal trends, news, and other short-term price catalysts.

Since we will dive into short-term price catalysts in the two sections below (bullish/bearish factors for the Bitcoin price), we will dedicate this section to understanding Bitcoin’s seasonal trends.

Bitcoin seasonality

As strange as it may sound, Bitcoin follows very clearly defined seasonal trends.

For example, November has historically been the best time to buy Bitcoin as it was followed by an average 80% price increase in the 2 months after.

On the other hand, January has on so far been the worst time to buy Bitcoin as Bitcoin’s price declines by an average of -8% in that month, every year.

Hence, a short-term speculator should keep this cyclical price pattern in mind in addition to just trading based on events or news.

Technical analysis tip

If you are just looking when to buy Bitcoin as a short-term trade, you should keep an eye on momentum indicators like the RSI and the MACD.

The RSI, for example, shows when Bitcoin is “overbought” or “oversold”. The price of Bitcoin is considered “overbought” when the RSI is above 70 and it is considered “oversold” when it is below 30.

rsi overbought crypto trading

So to decrease your chances of buying the top and increase the chances of buying at a lower price, it can be smart to wait until the RSI is below 30.

The MACD, on the other hand, shows the direction in which the price is trending.

MACD indicator bitcoin

If both lines are trending up and are far from the upper range, it means there is room for the price to keep rallying.

If, however, the price is at the top of the range and both MACD lines are starting to turn down, that could be a dangerous time to buy Bitcoin.

Bullish factors for the Bitcoin price

Famous for its incredible price growth, and notorious for its volatility, Bitcoin is widely regarded as a high-risk, high-reward investment option that can potentially generate incredible returns.

Beyond its day-to-day price fluctuations, which are generally influenced by transient changes in supply and demand, there are several long terms factors at play, which are thought to be responsible for its gradually climbing price.

Fortunately, major positive events surround Bitcoin typically attract significant coverage, giving you ample opportunity to take advantage when the time comes.

Bitcoin halving

The way the Bitcoin network is built, miners receive a BTC reward for every valid block discovered known, this is known as the block reward. The block reward provides an incentive for miners to keep on hashing, discovering new blocks and confirming new transactions.

Currently, each valid block mined unlocks a 12.5 BTC reward for the miner, but this number will be halved sometime in mid-2020, likely around May. This process will occur every 210,000 blocks until all 21 million Bitcoins have been mined.

When Bitcoin was first released back in 2009, miners received a 50 BTC reward per block, in 2012 after the first 210,000 blocks were mined, this reward was halved to 25 BTC. Similarly, in 2016 it was further reduced to 12.5 BTC and will be reduced to just 6.25 BTC at the next halving date.

Historically, the Bitcoin halving has been considered as a ‘buy event’ by cryptocurrency traders. Thanks to this controlled supply, the increased scarcity of Bitcoin can alter the supply-demand relationship of the market, pushing up prices.

Beyond this, as less freshly minted BTC enters circulation, the yearly inflation rate of Bitcoin also gradually reduces. The effect of this reduced inflation on Bitcoin prices may not show up immediately but does become more apparent as market demand increases.

If you consider each halving event as a segregated era in itself, then so far there have been two such eras. To see the relationship between each halving era and the price action across this time, refer to the table below.

1st Bitcoin Halving 2nd Bitcoin Halving
Halving Date 28th November 2012 9th July 2016
Date of Halving Era ATH 2nd December 2013 16th December 2017
Annual Inflation 12.5% 4.17%
Price at Halving $12.31 $650.63
Halving Era ATH $994.21 $19,535.7
Percentage Increase 7,976% 2,902%

As you can see, in each halving era, the effect of reduced supply and inflation has always driven up the price of BTC. Although the block reward halving is not the only reason for this, it is widely considered to be one of the most reliable bullish indicators.

Regulated investment product approval

Regulated investment products are an important addition to the cryptocurrency market, not only because they open cryptocurrency investments to a huge number of retail investors, but also because they stand to massively boost the overall liquidity of the underlying assets.

One of the most eagerly anticipated investment vehicles are Bitcoin Exchange Traded Funds (ETFs) which would enable any person with a Roth IRA or 401(k) account to invest in Bitcoin just as easily as investing they do with stocks through their broker.

Due to pent-up demand from both retail and institutional investors, the introduction of new regulated investment products could serve as an important investment vehicle that could, by some expert estimates, push Bitcoin prices above $40,000 for the first time.

As it stands, Bitcoin futures and options are the most commonly used regulated Bitcoin investment products that are available to the public. However, there have been several proposals for Bitcoin ETFs, but as of yet, these have all been either unsuccessful or delayed.

Beyond this, there are Exchange Traded Products (ETP) like the Amun Crypto Basket Index, which allow investors to gain exposure to cryptocurrencies without the hassles of setting up a Bitcoin wallet or manually tracking their portfolio.

Regulated investment products for Bitcoin also alleviate one of the major concerns for many potential Bitcoin investors — funds safety. With cryptocurrency exchanges being hacked regularly, and there being very little accountability in the space, these new investment vehicles could finally open Bitcoin investments to more risk-averse traders and institutions.

Overall, it is widely expected that the introduction of new regulated investment products for Bitcoin is an extremely bullish sign. If, or when the first Bitcoin ETF is introduced, the market is likely to experience a strong rally — keep an eye out for this sometime in late 2020.

Major companies getting involved in cryptocurrency

Arguably one of the major challenges for Bitcoin and most other cryptocurrencies today is corporate and institutional adoption. It is widely expected that when large financial institutions, international corporations, and even governments finally get involved, cryptocurrencies like Bitcoin will explode in value.

Every time a large company gets involved with cryptocurrencies by launching its own crypto project or implementing blockchain technology with its existing systems, the overall health of the cryptocurrency industry is improved.

For instance, when JPMorgan Chase and Signature Bank launched their own crypto projects in late 2018, the cryptocurrency market began recovering from the so-called ‘crypto winter’ that was 2018 — a period in which most cryptocurrencies lost a significant chunk of their value.

Part of the reason for this stems from the public’s trust in large corporations. When these corporations demonstrate an interest in working with new technologies like Bitcoin and cryptocurrencies, these inherit additional credibility. This also reduces the risk for further corporations and retailer who want to do the same, since the hard work is already completed by the big players.

When Facebook announced the intention to launch its own cryptocurrency, known as Libra, this again added an air of legitimacy to the space, allowing numerous partners including PayPal, Visa, and Spotify to potentially gain a foothold in the industry.

In the days following the announcement of Libra, Bitcoin gained almost 10% as the market soared. Much of this growth can likely be attributed to the huge amount of PR that the cryptocurrency industry received as a result, since Facebook may be the most influential company with its own public cryptocurrency.

Another advantage of large companies joining the crypto-space is improved regulatory oversight. With so many jobs at stake and huge amounts of corporate money invested, regulators often soften their tones against such projects. Because of this, regulatory leeway allotted to large corporations often ends producing a more favorable environment for further adopters.

Overall, if you hear that a large corporation with significant reach is involving itself in the blockchain or cryptocurrency industry, a significant price boon might follow shortly after.

Bearish factors for the Bitcoin price

Although it is not possible to predict the market with absolute certainty, there are several factors that are almost certainly bearish — with the potential to significantly dent the price of Bitcoin.

Much of the time there is plenty of time to react to adverse events that are likely to crash the market. If you notice negative press about any of the below examples, it’s worth investigating further to determine whether to exit your positions or short the market to your advantage.

Exchange hacks

Unfortunately, hacks on centralized cryptocurrency exchanges are a more common occurrence than most would like, with several such events typically happening each year.

These can range in severity, from just an insignificant amount of funds being stolen, to potentially market braking sums. Larger hacks often cause a negative media frenzy, which can cause a decrease in market faith and potentially lead to a substantial sell-off.

Similarly, if a hacker obtains an extremely large amount of Bitcoin or other cryptocurrencies and begins liquidating them through a variety of exchanges, this can sometimes be sufficient to crash the Bitcoin price as supply suddenly massively exceeds demand.

For the most part, cryptocurrency exchange hacks have little bearing on the Bitcoin price.

However, if the exchange is extremely popular and/or the size of the theft is significant, then the market will usually react negatively, with the price sometimes falling significantly in the days and weeks after the hack is revealed.

For example, when MtGox was found to have lost 850,000 BTC as a result of a long-standing theft, the price of Bitcoin began to plummet, sending BTC into a downtrend that lasted well over a year.

Being responsible for as much as 70% of all Bitcoin transactions, MtGox was easily the largest cryptocurrency exchange operating at the time, which understandably led to a huge amount of negative press surrounding both the exchange and Bitcoin in 2014.

Similarly, when $72 million was stolen from Bitfinex in August 2016, the price of Bitcoin plunged dramatically, with almost 20% of its value wiped off in the week surrounding the news.

Because of this, significant exchange hacks can be considered a bearish indicator, and often represent a good opportunity to short the market, though the price is likely to recover after the media frenzy dies down.

With that said, the way that the exchange handles the media and its obligations after the breach has a large bearing on the price action. This was recently demonstrated in May 2019, after a security breach at the current most popular exchange saw more than $40 million in Bitcoin stolen.

However, rather than allowing speculators to run rampant and spread mass hysteria, Binance immediately issued a statement notifying affected users that their loss would be covered using its ‘SAFU fund’.

This news not only restored faith in the exchange following an unfortunate event but also quelled any potential dump that might have otherwise occurred.

Country bans

As it stands, the legal status of Bitcoin largely varies from country to country. Some countries consider Bitcoin to be property, no different from owning a pair of shoes, while others have outright banned cryptocurrency for one or more reasons.

Only a small handful of countries, including Algeria, Bolivia, Ecuador, and Pakistan maintain an absolute ban on cryptocurrencies, while several others, such as China, Indonesia, and Saudi Arabia have restricted the use of certain cryptocurrency-related activities.

However, there is a general worry that as cryptocurrencies grow both in utility and reach, that various governments will react harshly to the new technology since they could eventually grow large enough to threaten monetary policy. 

Truly democratic countries like the Group of Seven (G7), formed of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States are unlikely to ever to implement a total crypto ban. However, countries lower on the democracy index, such as China, Saudi Arabia, and Vietnam are far less certain.

Similarly, with India recently proposing a draft bill that would render cryptocurrencies illegal, and potentially landowners and users an up to 10-year prison sentence, it appears even relatively democratic countries can take a negative stance on Bitcoin.

Regardless, any major country actually banning Bitcoin will almost certainly cause a significant drop in buying pressure as faith in the long-term future of the cryptocurrency is knocked.

For example, if the U.S. were to implement a total ban on Bitcoin, you can expect a dramatic crash, which will likely take a long time to recover from. Conversely, if a relatively obscure or unknown country bans Bitcoin, this might have little to no effect on the price action.

It should be noted that even rumors can adversely affect the price of Bitcoin, though usually only transiently, while even a partial ban, such as on cryptocurrency mining or trading can also disrupt the price.

For example, when it was revealed that China may be looking to ban cryptocurrency mining, Bitcoin quickly lost almost 10% of its value, before recovering within a week.

Major community clashes or software bugs

As a decentralized cryptocurrency, Bitcoin is only ever as strong as its community. After all, community miners are involved in maintaining the security of the network and ensuring transactions are confirmed quickly.

Similarly, users, merchants, and traders are responsible for the supply and demand of the cryptocurrency and ensuring that BTC changes hands as payment for goods and services.

Because of this, any event that threatens to reduce community sentiment can also adversely affect the value of BTC.

For example, if the Bitcoin community clashes over differences in opinion about how Bitcoin should operate, or how it should be managed going forward, this can cause a significant divide between among users.

If this divide is deep enough, Bitcoin may undergo what is known as a fork, which essentially sees a second Bitcoin offshoot diverge from the original, going on to become an independent cryptocurrency.

Most recently, this occurred in 2017 after there were serious disagreements about how Bitcoin should scale.

On one side of the fence, the purists believed that increasing the block size was the solution, while most thought that the implementation of the Segregated Witness upgrade and 2nd layer scaling techniques was the way forwarded.

Similarly, when Bitcoin Cash (BCH) forked into Bitcoin Cash ABC (BCHABC) and Bitcoin SV (BSV), Bitcoin suffered the most damage.

Over the period between mid-November and December 2018, Bitcoin lost almost 50% of its value due to the huge amount of negative PR and community unrest at the time.

Moreover, if there are any serious bugs or flaws on Bitcoin’s code, this could also massively reduce trust in the cryptocurrency and would be seen as an extremely bearish sign.

Fortunately, though several bugs have been uncovered in Bitcoin’s code, none have been successfully exploited to severely damage the network.

You can be fairly certain that any successfully exploited bug found to fraudulently mint BTC, break its cryptography or falsify transaction confirmations will severely impact Bitcoin’s price.

New bugs tend to be discovered shortly after Bitcoin core is updated, so it is wise to remain extra vigilant around new releases.

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