The price of Bitcoin is dropping But what dips should you look for to purchase? Three metrics that smart investors can use to decide the best time to purchase BTC.
The art of buying low and selling high isn’t as easy to do especially when emotions or volatile markets get added to the party. The most successful bargains are discovered when there’s “blood on the streets,” however, the risk of falling into a knife typically keeps investors on the sidelines.
In May, the month was particularly difficult for crypto investors due to the fact that Bitcoin ( BTC) fell to a record low of $26,782. Some experts are now anticipating that the price will be lower than $20,000 BTC cost in the near-term. In times like these, anxiety is rampant that the investor who is a contrarian seeks to invest in promising investments before the general market catches up.
Here’s a look at a few indicators that investors with a skewed view are able to use to pinpoint the best occasions to start positions prior to the next major market rally.
The Crypto Fear & Greed Index
It is the Crypto Fear & Greed index is a well-known gauge of market sentiment that many investors use to forecast the future for the markets. When taken at its on its own the index, an “extreme fear” reading, like the current mood is intended to indicate that you should stay out from the market and safeguard capital.
The index can serve as a price indicator, which was which was emphasized by analysts from the company that offers cryptocurrency intelligence Jarvis Labs.
One of the most important elements that could help the index to rise will be the increase of the price. Jarvis Labs backtested the idea of buying when the index is below a predetermined threshold, and selling once it hits a certain level.
In this test for this test, an Index score of 10 was selected to be the lowest threshold for the test, and scores between 35 and 50, and 65 were used as selling points.
If this method was tested back and the results revealed that the short-term option of selling when the index had surpassed 35, as illustrated in the blue line on the above chart, gave the most favorable results. This strategy yielded the annual return average of 14.6 percent, and the cumulative return was 133.4 percent.
In May, the index reached 10, and continued to record at least 10 or less in six of the 17 days which came up one of the low scores of 8 being recorded on the 17th of May.
While it’s possible that the market could still fall in the near future but history suggests that the prices and index will eventually climb above what they are currently at, offering the possibility of investing for traders who are not orthodox.
Affluence of the whale wallet
Follow Bitcoin Whale wallets that have balances that is more than 10,000 BTC plus is an additional indicator of that buying opportunities are present.
A closer look over the past three months reveals that, even as this market was shedding its value but accounts that hold at minimum 10,000 BTC has been increasing.
The quantity of whale wallets that are this size is at the highest since February 2021 when Bitcoin was trading at a high of $57,000 and the wallets were selling to the highest levels near the market peak.
Many experts have posted on Crypto Twitter are calling for an additional drop of 30-plus percent in the cost of BTC the whale accounts are betting on a bright future.
Certain traders purchase when Bitcoin price falls below its production cost.
Another metric that could give insight into what and where to buy is Bitcoin’s average mining price that is the amount it takes to mine one BTC.
As you can see in the chart above, the value of Bitcoin has been trading in excess of what it costs to produce most all of 2017 which suggests that the metric can be an excellent indicator of when generational buying opportunities are created.
A closer examination of the current data will reveal that the average mining price is $27,644 which is about $2,000 less than where BTC is trading at the time of writing.
The analysis also shows that in the past, when the price of BTC was lower than the cost of mining the price tended to remain just 10% below what it cost of mining, and typically was able to recover its parity in several months.
Bitcoin mining difficulty has also recently reached a record-breaking new record as the market is currently in an increase as more industrial-sized mining companies are put into operation. This suggests that it’s unlikely the cost of mining will decrease significantly in the near future.
All in all the current price to mine in comparison to the price on the market for BTC makes a convincing argument for investors who are naive that the fear that is prevalent in the market is the opportunity to become greedy even when the majority of investors are afraid.
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