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Cryptocurrency: When Is the Right Time to Buy?

By Katie Brockman - Jun 24, 2021 at 6:00AM

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Cryptocurrency prices are crashing. Is now the time to invest?

Cryptocurrency prices have been crashing over the past few weeks. The price of Bitcoin (BTC -3.55%) is down 50% since its peak in mid-April. Ethereum (ETH -4.44%) has fallen by nearly 55% since the middle of May, and Dogecoin (DOGE -2.70%) is down a whopping 73% from its peak in early May.

While falling prices can be cause for concern among investors, they can also make for great buying opportunities. This is especially true for higher-priced investments, and buying during a downturn can make them more affordable.

With the crypto market crashing, it may seem like a smart time to buy. But should you really invest now? Here's what you need to know.

Person putting Bitcoin token into a piggy bank.

Image source: Getty Images.

Finding the right time to buy

In theory, it makes sense to try to buy investments when their prices are lower, then sell once they reach their peak. However, this is far more difficult than it sounds.

Timing the market is incredibly challenging, and it's even more difficult with cryptocurrency because these investments are far more volatile than the average stock.

Crypto prices have been on a wild rollercoaster ride, so trying to find the perfect moment to buy is nearly impossible. If you buy now because it seems like prices have bottomed out, there's a chance they could fall even further and you'll have invested too soon. But if you wait too long, prices could skyrocket and you've missed your opportunity.

Bitcoin Price Chart

Bitcoin Price data by YCharts

Cryptocurrency also doesn't have a proven track record like stocks, so it's anyone's guess whether these currencies will bounce back from their slumps.

So far, major cryptocurrencies like Bitcoin have managed to recover from downturns. But there are never any guarantees that these investments will continue to thrive, and there's a chance that cryptocurrency in general will fail. If you buy when prices are low under the assumption that they will surge again, you may be setting yourself up for disappointment if cryptocurrency doesn't succeed.

When should you buy?

If you're interested in buying cryptocurrency, then, when should you buy? The truth is that it doesn't necessarily matter -- as long as you're strategic about it.

The key to making money in the stock market is to buy strong investments and hold them for the long term. If they really are good investments, they should grow over time, and their prices should increase along with them.

The same principle is true with cryptocurrency. If you believe cryptocurrency has a bright future and will change the world, it doesn't necessarily matter whether you buy when Bitcoin costs $60,000 or $30,000 per token. If it ends up reaching, say, $500,000 per token someday, you'll make a hefty profit regardless.

Of course, there are no promises that Bitcoin or any cryptocurrency will succeed. But if you're going to invest, it should be because you believe in its potential and are willing to hold on to your investments for years or even decades. If you're only investing to try to make a quick buck, that's a dangerous game and you'll likely end up losing more than you earn.

Bitcoin chart with a rocket moving upward.

Image source: Getty Images.

Another way to reduce price volatility is to take advantage of dollar-cost averaging. With dollar-cost averaging, you invest a certain amount of money on a set schedule -- say, $1,000 every quarter, or $300 each month.

Sometimes, you'll end up buying when prices are high. But other times you'll invest when prices are lower. Over time, those highs and lows should average out. This can help reduce the impact of volatility on your investments, and you don't need to worry about buying at just the right moment.

Regardless of when you choose to invest, make sure you're keeping a long-term outlook. Nobody knows whether cryptocurrency will succeed or not, but if it does, you can maximize your earnings by holding your investments for the long term.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bitcoin Stock Quote
$22,912.48 (-3.55%) $-843.07
Dogecoin Stock Quote
$0.07 (-2.70%) $0.00
Ethereum Stock Quote
$1,686.76 (-4.44%) $-78.35

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