3 metrics contrarian crypto investors use to know when to buy Bitcoin

It is difficult to buy low and sell high, especially when emotions and volatile markets are involved. The best deals have been found historically when there is “blood on streets.” However, most investors stay away from the risk of being cut by a knife.

Bitcoin (BTC), which fell to $26,782 at the low, was a particularly difficult month for crypto-holders. Analysts now predict a price of sub-$20,000 BTC in the near future. When fear runs rampant, the contrarian investor seeks to take positions in promising assets to avoid the wider market coming to its senses.

Here are some indicators that contrarian investors can use in spotting the right moment to open positions ahead of the next market rally.

The Crypto Fear & Greed Index

Crypto Fear & Greed is a well-known indicator of market sentiment. It is used by most investors to forecast the future. A reading of “extreme fear”, such as current sentiment, can be taken at face value and is intended to signal that investors should stay away from the market and preserve capital.

Crypto Fear & Greed Index. Source: Alternative

Analysts at Jarvis Labs, a cryptocurrency intelligence firm, have noted that the index can be used as an indicator of market conditions.

An increase in the price is one of the most important factors that can cause the index to rise. Jarvis Labs tested the idea of buying the index below a threshold, and then selling it when it reaches a predetermined level.

An index score of 10 was selected for the low threshold. Scores of 35, 50, and 65 were chosen for sell points.

Fear & Greed returns to BTC. Source: Jarvis Labs

Backtested results revealed that selling within a shorter time frame after the index exceeded 35 was the best option. This is represented by the yellow line in this chart. This method yielded an average annual return of 14.6%, and a cumulative return at 133.4%.

The index reached 10 on May 10 and maintained a score of 10 on six of the following 17 days. The lowest score, 8 on May 17, was recorded.

Although it is possible that the market will continue to head lower in the short term, history shows that the price and index will eventually rise beyond their current levels. This could present a potential investment opportunity, for contrarian traders.

Whale wallet accumulation

Another indicator of buying opportunities is to follow Bitcoin whale wallets that have a balance greater than 10,000 BTC.

Number of Bitcoin addresses that have a balance of less than 10,000 BTC. Glassnode

The past three months have shown that, while the market has been falling, wallets with at least 10,000 BTC have been increasing.

Number of Bitcoin addresses that have a balance of less than 10,000 BTC. Glassnode

This is the highest number of whale wallets this large since February 2021 when Bitcoin traded above $57,000. These wallets were selling to strength close to the top of the market.

Many analysts on Crypto Twitter call for a further drop of 30+ percent in BTC’s price, but whale wallets believe that there will be a positive outcome.

Related: Why Bitcoin is regaining its crypto-market dominance

Some traders purchase Bitcoin when its price falls below its cost of production

A second metric that can help you determine when and where you should buy Bitcoin is Bitcoin’s average mine cost. This is the amount it costs to mine 1 BTC.

Bitcoin average mining cost. Source: MacroMicro

The chart shows that Bitcoin’s price has been trading at or above its cost of production for most of the time since 2017. This indicates that this metric can be used to predict when there will be future generational buying opportunities.

The current reading shows that the mining cost average is $27,644, which is $2,000 less than where BTC trades at the time.

Bitcoin average mining cost. Source: MacroMicro

Further analysis shows that even though the market price for Bitcoin fell below the average mining expense, it generally stayed within 10% and regained parity in a few months.

The difficulty of mining Bitcoin has also reached an all-time high. This market is continuing to experience an uptrend with more large-scale mining operations coming online. It is unlikely that the average mining cost will drop in the near future.

All things considered, the current cost of mining BTC vs the market price of BTC makes a convincing case for the contrarian investor. The market’s fear dominates the market and presents an opportunity for investors to be greedy while others fear.

You would like to learn more about investing and trading in the crypto markets?

Bitcoin mining in Norway is approved by the proposed ban. Bitcoin price bottom signals flashes as Fear & Greed Index matches March 2020 Lows. Despite the crypto ban, traders are warning of a drop to $2.4KChina emerges as the 2nd largest Bitcoin mining hub despite price volatilitycom. You should do your research before making any investment or trading decision.