When it comes to crypto investments, buying low and selling high is the first thing that comes to mind. Anyway, it is easier said than done.
May 2022 has been a real challenge for crypto investors, as Bitcoin dropped to less than $27,000. Some experts expect it to reach an even lower price soon. Times like this make it hard for investors to establish positions.
There are several indicators that investors consider finding the best opportunities in the cryptocurrency market.
Fear and Greed index
This is a popular measure in the cryptocurrency market, used by investors to forecast its future.
Simply explained, the Crypto Fear and Greed index generates a value between 1 and 100, where 1 means the market is expected to fall, and 100 is the value for experiencing greed (buying more assets).
As the price of cryptocurrencies increases, so does the index. Anyway, there is an idea put down by Jarvis Labs, to buy when the index is low and to sell when it reaches a predetermined high. Analysis shows that this method provides an annual average return of more than 14% and a cumulative return of more than 130%.
While there is still a possibility that the market will fall in the near term, the experience shows us that both the index and the price will at some point rise above the current levels. So, there is a good investment opportunity.
Whale wallets
Another indicator that shows a good buying opportunity is following Bitcoin whale wallets with balances of at least 10,000 BTC.
If we have a look at the past months, we will see that while the market has been selling off, there are more and more wallets holding 10,000 or more BTC.
Actually, the number of whale wallets of this size has reached its highest level, since February 2021.
So, we can definitely say that whale wallets are expecting a bright future for the cryptocurrency market, and it is a good sign for investors.
A price below the cost of production
Another sign investors use to decide when to buy Bitcoin is when its price drops below the costs of its production (mining cost).
Actually, at the end of May 2022, the mining cost of Bitcoin was around $2,000 below where the cryptocurrency was trading.
Another analysis shows that in the past, when BTC fell below its mining cost, it stayed within 10% of the mining cost and regained parity within a few months.
Furthermore, BTC mining difficulty also reached an all-time high, and it is almost impossible for the average mining cost to decline anytime soon.
So, the cost to mine, compared to the market price of Bitcoin, provides another opportunity for investors to be greedy, while everyone else is being fearful.
Conclusion
Important thing to remember here is while there may be some good opportunities to invest in cryptocurrencies and to make the best of it, you still need to be careful.
As we know, cryptocurrencies are highly volatile and while there are some well known market trends and signs, we can never be sure what comes next.
Do your research and never invest more than you are willing to lose.
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