Best Time to Buy Bitcoin

Written by Sean GraytokUpdated: 15th Dec 2021
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This article will identify the best times to buy bitcoinfor those looking to maximize their potential returns.

When is the Best Time to Buy Bitcoin?

The best time to buy bitcoin is different for each person due to their varying investing goals, time horizon, and risk tolerance.

But if you have decided that you want to buy bitcoin or buy more of it, there are better times to enter the market than others. Here are the best times to buy bitcoin:

Dollar-Cost Averaging

Dollar-cost averaging into bitcoin means you’re making routine purchases of the asset.

This could be monthly, weekly, daily, or even hourly if you’re using certain platforms.

Dollar-cost averaging over a long period will hide some of bitcoin’s volatility in your portfolio, as you will inevitably buy some tops and bottoms along the way that will balance each other out.

Dollar-cost averaging is an actionable strategy behind the saying, “It’s time in the market, not timing the market.”

Trying to optimize entry points may result in your capital getting left on the sidelines for too long.

Therefore, for some people, the best time to buy bitcoin is at scheduled intervals, regardless of price.

Extreme Fear

If dollar-cost averaging is not attractive to you, and you’re looking to deploy capital at an ideal time, consider buying when there is extreme fear in the market.

This fear is quantified by the Bitcoin Fear & Greed Index, which is calculated daily by looking at factors like volatility, volume, momentum, and social media sentiment.

Values near 0 represent “Extreme Fear,” and values near 100 signal “Extreme Greed.”

Entering the market at times of Extreme Fear improves your chances of buying at a bottom and thus potentially increases your long-term returns.

Another investing adage fits this particular strategy: “Buy when there’s blood in the streets.”

Low MVRV Ratio

The Market Value to Realized Value (MVRV) ratio is an on-chain metric used to assess bitcoin’s fair value.

MVRV compares the current market value of the Bitcoin network to the aggregate price paid for all bitcoin in existence. Here’s how it’s calculated:

MVRV Ratio = Market Value / Realized Value

Say someone bought 1,000 BTC back when it was $10. They only contribute $10,000 to realized value, but the current market value of the coins is equal to $50M if the price of BTC is at $50K (# of coins x market price).

Generally speaking, here’s how to interpret different MVRV ratios:

  • MVRV > 1.00: bitcoin’s valuation is at a premium relative to the holders’ aggregate cost base
  • MVRV = 1.00: bitcoin is at fair value, and the network’s value is the same as the amount spent to acquire all coins (said another way, market cap = USD value stored in-network)
  • MVRV < 1.00: bitcoin’s valuation is at a discount relative to the holders’ aggregate cost base

MVRV ratios at or around 1.00 have represented great times to buy bitcoin relative to its historic valuation.

However, the asset typically trades above the 1.00 threshold, and we’ll probably need another 80% correction from all-time highs to get into this level of discount again.

Below is the historic MVRV ratio, which oscillates in orange at the bottom of the chart.

The green boxes indicate periods where MVRV dipped below 1.00, corresponding with painful drawdowns in price.

When is it the best time to buy bitcoin?

The March 2020 sell-off to $3,800 was the last time MVRV entered a green zone, and it was only for a few days.

MVRV may continue to set higher lows as bitcoin continues to mature, meaning 1.40 might be the new 1.00, for example.

Regardless, one of the best times to buy bitcoin is when its MVRV ratio gets dangerously low.

Follow the Smart Money

Thanks to on-chain analytics, it is possible to monitor the trading behavior of “smart money” participants by looking at changes in Long-Term Holder (LTH) supply.

Historically, this cohort buys bitcoin during price weakness and then sells coins into strengthening price action.

Periods of sideways chop and boredom have historically been optimal times to buy bitcoin.

Long-Term Holders aggressively accumulate during these bear markets and patiently wait for demand to return from new market actors.

An uptrend in LTH supply indicates that smart money is buying.

Following smart money has been a profitable strategy over the years and may help you buy bottoms instead of tops.

Understanding the Best Time to Buy Bitcoin

In sum, the data suggest that the best time to buy bitcoin is during a bear market for those looking to optimize entry points.

Bear markets consist of extreme fear, low MVRV ratios, and smart money accumulation.

Those who bought when others were fearful have been rewarded.

However, as previously mentioned, dollar-cost averaging is an effective way to stack Sats in the meantime.

A popular strategy is to regularly DCA into bitcoin to get out of cash and then buy a little extra during a dip or prolonged bear market.

Bottom Line: Best Time to Buy Bitcoin

It seems counter-intuitive, but the best time to buy bitcoin is when it feels like you shouldn’t.

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This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.