The crypto market has seen major momentum throughout 2024, reaching a new all-time high in November following the U.S. presidential election outcome. Like many others, you may be wondering if now is still a good time to invest or if it’s wiser to wait until the market cools.
While the future is always uncertain, there are proven strategies to help you time your crypto investments wisely.
What to Know Before You Buy Crypto
Even today, more than a decade after Bitcoin's introduction, cryptocurrencies are still a highly volatile asset class that can experience significant price swings. This volatility is driven by a number of factors, including market speculation, regulatory news, technological advancements, and macroeconomic trends.
So be sure to familiarize yourself with the specific cryptocurrency you’re interested in, its underlying technology, use cases, tokenomics and the team behind it.
The security of your investment is just as important. Use reputable exchanges and secure crypto wallets to protect against hacks and theft.
Is Crypto a Good Investment Today?
Yes, crypto is a good investment today – but only if you understand the risks involved. Much like stocks, real estate, or commodities, crypto assets vary widely. You could invest in an overvalued company struggling to generate positive cash flow and lose money, or you could be an early investor in a startup that eventually surpasses giants like Apple.
Instead of asking, "Is now a good time to buy crypto?" consider, "Should you buy crypto at all?"
Investing in cryptocurrency requires nuance. With a wide variety of projects and tokens, there are both excellent and poor investments. Crypto resembles the early internet era, where many companies emerged, some becoming industry leaders and others failing, leading to lost investments.
Even with the risks, adding such companies to a diversified portfolio back then was wise. We are at a similar juncture with crypto now. The real question is not if crypto is too risky, but if it's too risky not to have some exposure to it.
Regardless, one thing has to be clear: crypto is still a very young and volatile market with a lot of speculation, varying degrees of liquidity and opportunistic scammers waiting to take your money.
While some investments have the potential to reward life-changing money, most of them fail.
Is It Too Late to Buy crypto?
It’s still possible to achieve significant profits with cryptocurrencies, but timing and strategy are essential. Consider Bitcoin: in 2010, it was valued at around 0.10$, and by its all-time high in November 2024, it had soared by an astounding 180,266,721% to approximately 93,000$.
I’m just going to say it: There won’t be another investment like it. But newer projects with innovative technologies still emerge, offering the potential for significant returns.
These emerging projects often bring unique solutions to existing problems, create new use cases, or improve on the technology pioneered by their predecessors. For example, decentralized finance (DeFi) platforms have revolutionized the way we think about financial services, and non-fungible tokens (NFTs) have opened up new avenues in digital ownership and art.
Blockchain technology continues to expand into various industries, from supply chain management to gaming, creating new investment opportunities. If you stay up to date and can identify promising projects early, you might still have a chance to capitalize on an evolving landscape.
For everyone else, there are two main concepts to consider when looking for the best time to buy crypto.
Time in the Market vs Timing the Market
Time in the Market refers to the strategy of holding onto investments for an extended period, capitalizing on long-term growth rather than short-term price fluctuations. This could mean buying and holding assets like Bitcoin or Ethereum for several years, regardless of market volatility.
Let's take Bitcoin as an example. Suppose you bought 1 Bitcoin in 2015 when the price was around 300$. By holding onto your investment through the ups and downs, including the dramatic rise to nearly 20,000$ in December 2017 and the subsequent drop, you would have seen your Bitcoin reach an all-time high of 93,000$ in November 2024. Despite periods of significant volatility, you benefit from the overall upward trajectory of Bitcoin's value as a long-term holder.
Timing the Market involves attempting to predict and capitalize on market movements by buying low and selling high within shorter time frames. This strategy requires more frequent trading and a keen eye on market trends and news.
Consider trying to time the market with Bitcoin. You might have bought Bitcoin at 10,000$ in early 2020, anticipating a price surge. When Bitcoin's price rose to 30,000$ by the end of 2020, you sold your holdings, tripling your investment. Later, seeing Bitcoin rise again, you might have bought in at 40,000$, hoping for continued growth. However, if the price dropped to 25,000$ shortly after, you would face losses if you sold in panic or impatience.
While both strategies have their merits, "time in the market" tends to be more suitable for investors looking for long-term growth and stability, whereas "timing the market" may appeal to those seeking short-term gains and willing to take on higher risk and active management.
Dollar Cost Averaging
There is an investment strategy that can be seen as a compromise between timing the market and time in the market: Dollar Cost Averaging.
Dollar Cost Averaging (DCA) involves investing a certain amount of money at regular intervals without aiming for specific price points. This strategy reduces the impact of short-term crypto volatility by spreading out the purchase over time.
Instead of investing a large sum of money all at once, you invest smaller amounts regularly over a period of time. By doing this, you avoid the risk of buying a large amount of cryptocurrency when prices are high, only to see the value drop shortly after.
By spreading out your investments, you buy at different price points, which averages out the cost of your investment. You might end up seeing smaller returns than if you had invested a larger amount at just the right time, but you might also avoid losing a significant amount compared to entering the market right at the peak.
Dollar Cost Averaging is a good way to stay disciplined as an investor without having to guess for the ideal moment to invest.
Current Crypto Events Affecting the Market
Donald Trump's recent victory in the U.S. presidential election has electrified the cryptocurrency market, propelling Bitcoin to a record high of over 93,000$. This surge is fueled by heightened expectations for a more crypto-friendly administration, as well as a recent announcement from Trump to buy and hold Bitcoin in the U.S. treasury. This unprecedented move has intensified investor optimism, suggesting that the government may view Bitcoin as a strategic asset, potentially boosting demand and legitimizing crypto as a mainstream financial tool.
Other Key Events Supporting the 2024 Bull Market:
- Approval of Spot Bitcoin ETFs: Earlier this year, U.S. regulators approved several spot Bitcoin ETFs, creating a regulated and accessible entry point for institutional investors. This approval has significantly increased liquidity and market confidence, drawing more capital into the space.
- April Bitcoin Halving Event: The Bitcoin halving reduced the miner block reward, slowing Bitcoin's supply growth. Historically, this event has led to notable price gains, with demand outstripping the reduced supply—a trend currently supporting Bitcoin’s upward momentum.
- Increasing Institutional Interest and Rising Consumer Adoption: Major corporations like BlackRock and Mastercard have entered the crypto space, and consumer adoption, especially among younger investors, continues to grow. This shift underscores digital assets’ increasing role in both investment portfolios and everyday transactions.
These factors, combined with Trump’s win and his Bitcoin treasury proposal, have cultivated an exceptionally bullish environment for crypto in 2024. The market is now not only responding to favorable regulatory signals but also preparing for a possible transformation of Bitcoin into a U.S. strategic asset, a move that could drive sustained long-term growth in the sector.
Taxes on Cryptocurrency Earnings
An important thing to keep in mind when investing into crypto assets is the taxation of crypto profits. While regulation might still be catching up, tax rules for crypto investments are relatively clear in most countries and might fall under either capital gains tax, income tax or wealth tax.
We’ve written comprehensive tax guides to provide you with the most accurate information and useful guidance. Read them here: Crypto Tax Guides
An essential part of risk management is to keep enough liquidity to be able to pay your taxes in time. Trading highly volatile assets like crypto over the course of multiple tax years might lead to a rough awakening once the tax man knocks on the door.
Especially in countries like the USA or Germany, where even a trade between different crypto assets is regarded as a taxable transaction, it is important to put aside enough money to cover your tax liabilities after the close of a tax year.
Our crypto tax calculator supports you in optimizing your crypto taxes and generates your individual crypto tax report with just a few clicks!