Crypto strategies: Timing the market vs time in the market

By Katharine Wooller, MD, Dacxi UK and Ireland
Wooller investigates the prevailing market trends in cryptocurrency and analyses the different strategies of big-time and small-time investors

There is a lot of surface noise in the cryptocurrency space and most of it is the psychobabble of investor sentiment. One week it is the sound of everybody rushing towards a feeding frenzy. The next the wailing and gnashing of teeth as those near the surface (the ones most exposed) get spooked and rush the other way, falling over each other in the race to escape. 

Watching crypto markets in the last few weeks has been brutal viewing; best done on a strong stomach and ideally through your fingers!  It’s impossible to know what drives lemmings off a cliff, when they run, they all run the same way at once. 

The speculative crypto investor is not always a logical beast, and there seems to be a lot of sentiment where the money is either ‘all in’ or ‘all out’.  Crypto is exquisitely volatile, and annoyingly can sometimes defy logic – no-one really knows what is going on.  Thankfully the blockchain data has some answers on what the smart money is doing.

Essentially scared sheep are trying to ‘time the market’, traders who are buying and selling short term on a hunch the market is running in their direction, going with the flow in a world where cash is king. Recently the sheep got spooked, their time was up. Unsurprisingly, when the market run is to sell ‘coin’, it turns the asset back into what it sees as the comparative safety of fiat.

Pictured: Katharine Wooller

There is another investment philosophy, one aimed not at spinning-off short term cash but on the principles of accumulating long-term wealth. A far less noisy space where deeper strategic thinkers are quietly building crypto portfolios of significant size, this is where the ‘whales’ (a crypto industry term for those who hold at least 1,000 BTC) hang-out.

Whales have no interest in timing the market, rather their focus is ‘time in the market’. Not driven by market sentiment, their focus is buy-and-hold. 

So where does this leave the minnows, the small investor who might be wondering if now is the time to think about cryptocurrency as an asset class to add to a pension or an ISA. Somebody looking to diversify out of equities. A prudent saver who thinks structured saving in a digital wallet is something that would add value to a retirement strategy. Where does the minnow look?

Currently if the minnow looks below the surface, at what the whales are doing, he or she would see something very interesting. Since 19 May's price crash, the bottom feeding whales have been hoovering up BTC. Quite simply, they are ‘buying the dip’ – as the sardines rushed to sell, the whales were happy to hunt in the bargain basement. They have been accumulating wealth.

To my mind, the smart, forward thinking retail investor, with a buy-and-hold mentality, might consider this a buying signal. In which case the question becomes how to dip a toe in the water. 

This article was contributed by Katharine Wooller, Managing Director, Dacxi UK and Ireland

Dacxi has established one of the UK’s leading cryptocurrency wealth platforms, where small to medium investors can buy individual coins or ‘bundles’ of Blue Chip or selected altcoins to build a diversified cryptocurrency wallet.

Share

Featured Articles

Why Web3 payment services will overcome legacy limitations

Mark Smargon, founder and CEO of Fuse, discusses how Web3 will transform the payments space and overcome financial legacy limitations

Interview: We asked a chatbot what it thinks about chatbots

We interviewed ChatGPT, the text-based chatbot taking the internet by storm, about the future of artificial intelligence (AI) in banking and finance

The challenges of address data in cross-border payments

A truly global solution is critical to meeting cross-border needs at scale, writes Loqate, a leading developer of global address verification solutions

Top 10 fintech disruptions to watch out for in 2023

Financial Services (FinServ)

PBF CEO, Morgan McKenney on blockchain, DeFi & tokenization

Crypto

UAE-based BNPL fintech Tabby secures $58mn in Series C round

Digital Payments