Nobody wants to buy Bitcoin at the current price because maybe tomorrow will drop even more and then they will buy. But sometimes there is no such thing as ‘tomorrow’.
Traders often check CoinMarketCap every day to see if the price of Bitcoin will drop any more and make a decision to buy or wait.
We will show us the bigger picture, broken down by deals: over 10%, 5%, 3% and 1%. Accordingly, how far should players wait for Bitcoin to drop to buy? And which strategy has brought the biggest profit since the beginning of the year?
Number of Bitcoin purchases versus a discount
Suppose, you are a conservative investor with large capital and can buy 1 or 2 Bitcoins at the same time, but only ‘buy low’ (dip) and in this case the low is a 10% decrease or so. up from the price of the previous day. To you, “-10%” and the market in a sea of blood is an opportunity to buy, not sell.
So in 2020 with the lowest of $ 3,800 and the highest of $ 12,300, how many purchases will you have?
This year, Bitcoin is down more than 10% from the previous day’s price in just 2 days March 12 and March 13 due to Dark Thursday. If you buy 1 Bitcoin on these days, which is 2 Bitcoins in total, the average purchase price will be $ 5,684, compared to the transaction price at the time of writing is $ 10,749. Thus, profits of more than $ 5,000 per coin!
Note, if your risk profile only allows to buy Bitcoin if it falls by more than 7.5%, then there is only 2 chance because daily Bitcoin only drops 2 times exceeding 7.5%.
Let’s say you are a market player and only buy Bitcoin if it drops more than 5% between 2 days, allowing a few transactions to make a profit, but not so much that it makes you lose your mind. How many times do you think you will buy? Even though people warn the BTC market to be over volatile, you have only made 7 transactions out of 270 since the beginning of the year, which is 2.7% of the year so far.
Just 7 days out of the year, Bitcoin is down more than 5% from the previous day’s price: 5 times from March 8 to March 16, on May 10 before the halving and earlier this month on September 3. The average purchase price is $ 7,510, compared with the current transaction price of $ 10,749, which means a profit of more than $ 2,700 per visit.
However, because you buy more times, the capital will be lower, so instead of buying the entire Bitcoin, you buy half each time. This option yields a final profit at $ 3,180 and if you buy 0.5 Bitcoin each time, you will get a final profit of $ 11,140.
Let’s say you aim for a quick turnaround but invest a smaller amount each time. The risk profile only allows to buy Bitcoin if it drops 3% daily, you would buy 14 times.
These 14 transactions obviously take into account the buys above and a few other days: Feb. 26 drops below $ 10,000, March 28 and March 29 when the price corrects from the March, date April 10, two days before the halving, May 20 and September 4.
The average purchase price is $ 7,800 from a total of 14 purchases, less than $ 2,900 at the time of writing. Next, you will buy a smaller portion of 1 Bitcoin, say 0.25 BTC, yielding a final return of $ 10,130 for the whole year.
Suppose, you are the brave person who dares to execute many transactions, act quite quickly as soon as Bitcoin drops. The risk profile encourages you to buy Bitcoin each time it drops more than 1% daily, how much Bitcoin do you think you will buy? Do you think this type of standard will keep you busy year round, because the market is very volatile?
The answer is yes, but not by much. You will make 58 transactions, that is, 21% of the year to buy Bitcoin. To be fair, this number isn’t much.
Quantity purchased per month
Profits will be pretty low, just $ 1,800 above the average purchase price of $ 8,800 for all 58 purchases on those days. Due to the larger number of transactions, it will end up buying a smaller amount of Bitcoin each time, say 0.1 BTC per order, profitable at $ 10,650 for the whole year.
Which path should I choose?
Year-to-date, based on different risk profiles in terms of frequency and when to buy Bitcoin, the ultimate return would be with a -5% drop. Not only does this limit the number of transactions to 7 (thereby reducing order fees, buying time, and the effort spent researching and executing orders), but also increasing profits by more than $ 500 from any other. any other strategy.
Although each strategy has different points to consider such as the amount of capital invested, the number of transactions involved, the profit limit or the duration of the Bitcoin price chart, in a way, buying Bitcoin is always always better not to buy.
Source: Coinmarketcap