The stock market wasn’t the only market seeing flashes of big red drops. The crypto market took big percentage dips 3 different times this week. The market had looked very strong going into the week, mostly due to Ethereum ($ETH) absolutely crushing its All-Time High (ATH). Ethereum reached a new high of $4,384 on May 12th, capping off an almost three week run from $2,000 to the ATH. These dips are not signaling an end to a crypto boom however, they’re just giving its investors a chance to buy in before the takeoff.
Why Will There Be a Boom?
The answer to this question is simple. Usually I like more than just a simple answer before I invest my money. Although, this simple answer has some years to back it up. The answer is; A crypto boom happens every summer. A trend like this is similar to how last summer we noticed the Dow Jones always opened down on Thursday because of the abysmal weekly job report. People were not back to work yet, but every week the market seemed to overvalue this report, and sell off in premarket trading when the report came out. Crypto also usually enjoys the holiday season and sees a decent spike around the change of the new year.
For this analysis we can use the charts of Bitcoin ($BTC), as it is a solid indicator of the rest of the crypto market. In the summers of 2017, 2019, and 2020 we have seen considerable spikes in the Bitcoin chart. At some point from May to August of these years, Bitcoin experienced a significant price run compared to its performance the rest of the year. This is not however a signal to sell once the summer is over, this just presents us with a good buying point right around now. If your plan is to hold (a good plan), buy right now and hold (hodl) all the way to those ATHs!
Is it Only Bitcoin?
It certainly is not. The reason that Bitcoin is a good indicator of the market is because of Bitcoin traders. When Bitcoin’s price runs high, traders take their gains and put it into smaller coins since the gains allow for high total coin purchases. This immediate reinvestment makes it seem like the coins are just following right after Bitcoin, but it is actually just traders pumping with their gains. This used to be a crypto standard but in the past few months we have seen coins take off on their own and hold strength against large Bitcoin moves. Recently, Cardano ($ADA) spiked high while Bitcoin consolidated, and held its highs while Bitcoin slid.
The large majority of cryptos will ride high this summer. Personally, I believe if the coin doesn’t take off, its probably not a good project. With most cryptocurrencies being relatively young, it is important to make sure you are investing into a good project with goals, and not just a crypto that was recently on the top movers. Some coins I believe have great projects that are growing are Chainlink ($LINK), VI-D ($VIDT), and Phala Network ($PHA). In the near future I will go into depth about these projects and others as well.
How Should You Prepare For This Boom?
A crypto boom can be prepared for in two simple steps:
- Do your research
- Get your cash ready
As I said before, understand which projects you can believe in and trust it will impact the crypto world. Then, get your cash together. If you only have $200 right now, know where you want to put $50 and where you want to put $100, or put it all in one coin. If you have $6,000 to use, put it to use. Diversifying is key, but over diversifying right away can some times limit gains. Find good projects, collect from them, and then begin to branch out. Summer 2021 will be one to remember, don’t remember it because you didn’t buy!
The Common Trader 