The central premise of investing is to buy low and sell high. After several challenging months for bitcoin prices, some investors are now questioning whether the markets are set to reverse, and return to a more robustly positive trajectory.
Indeed, in recent days, prices have recovered to some degree, with bitcoin trading at $3797.44 at the time of writing, up some 8.39% on the day. Almost a year since bitcoin’s all time highs, investors are increasingly asking “is now the time to buy?”
While there are signs for optimism, and a clear turnaround emerging, not every analyst recommends you buy…or at least, not yet. Like Timothy Enneking of Digital Capital Management, who argues that traders who hold off in the hope that prices fall further could stand to make the biggest gains from a bitcoin rebound.
In an article outlining his view, Enneking analyzed all previous instances of bitcoin dropping more than 80% from previous highs, finding four such previous examples – from $35 to $2 in 2011, from $259 to $45 in 2013, from $1,163 to $152 in 2013-15 and from $19,666 to $3,277 in 2017-18.
Comparing the drops in each of these periods, he suggests that the current bear market is not as significant as previous highs to lows.
“The current bear market has, to date, barely exceeded the third largest. To reach second place, BTC would have to drop to $2,553. To take first place, BTC would have to fall back to $1,239.”
He goes on to calculate four months as the average time it takes for prices to recover double their lowest price, with the average peak one year and four months into the future.
Suggesting markets may not yet have reached their natural bottom, Enneking nonetheless said now was still a good time to invest.
“From an investment standpoint, however, while it’s not the time to buy, it is the time to invest. It’s obviously impossible to time the bottom exactly, so one must be positioned to invest now to maximize the benefit of the reversal.”
“How to do that? Select a long-short investment vehicle…and invest now. I’m quite certain you won’t have to wait long for the next bull run to begin and, in the meantime, such a vehicle can make money on the balance of the drop.”