Disclaimer: This is not investment advice. Do your research before investing money in crypto.
This article answers the most important retail question: “Should I invest in bitcoin now?” As bitcoin just rises, it can be difficult for new investors waiting for a downturn to invest. While waiting for a downturn to invest, it sounds reasonable, especially not for new users.
So, how do you invest? Clearly, the wait for a downturn has not worked since New Year’s Eve, as bitcoin has been rising 4% on average steadily.
No matter what type of investor you are, here are some things to look for before buying bitcoin:
With chain metrics is a specialty of the blockchain because of their transparent nature. Users can see what is happening on the blockchain without sacrificing the user’s pseudonym.
While criteria on chain may sound intimidating, it is not. On the other hand, handling on-chain data can be difficult. Fortunately for us, however, there are several websites that give us statistics without having to worry about data handling. All you have to do is interpret it.
Consider statistics on the chain as a prophecy, but only more certain and reliable.
Here are some quick tips you can check before investing in bitcoin.
Stabilecoin flow: Stablecoins are used to buy crypto assets, whether it is Bitcoin, Ethereum, XRP or Polkadot. So if we see a large inflow of stablecoin to stock markets, we can interpret this as a positive sign because investors are willing to buy and enter the market.
Currency reserves: If the foreign exchange reserves fall, we can assume that investors will withdraw their funds from the stock exchanges, and this only happens on a big run where investors let their assets profit and wait for the top. The fall in foreign exchange reserves is therefore bullish.
Alternating flow: If investors deposit any assets other than stable coins, it means that investors want to sell the asset or perhaps exchange it for something else. Either way, it involves the sale / conversion of an asset and it is clumsy. On the contrary, when we see large outflows of assets [like BTC, ETH] of a stock market we can assume that it is either stored in cold storage or it was an OTC transaction, and investors are taking it out of the stock market in anticipation of a bull run. So it is also bullish.
Refer to this article for an example.
Similarly, one can find more trends like this if you are familiar with on-chain data or other blockchain / exchange data. For example, look at the financing rate chart that is overlaid with the price of bitcoin.
Source: CryptoQuant
A simple takeaway here is that when the financing rate dropped, it was a buy signal as the price rose after this drop.