Before discovering the Bitcoin and cryptocurrency movement, I was a traditional stock investor. I tried my luck in day trading and swing trading and didn’t get anywhere. It wasn’t until I learned more about Exchange Trade Funds (ETF’s), compound interest, and dollar cost averaging (DCA) that I started to see some growth in my portfolio.
So what does this have to do with Bitcoin? Well, unless you have 30 grand lying around, you won’t be buying a whole coin any time soon. This is where dollar cost averaging comes into play as an investment strategy. Dollar cost averaging is an investment strategy where you make small purchase amounts of an asset over a period of time in order to lower your overall exposure to a volatile market. For example, let’s say you have $100 to invest into Bitcoin. Instead of purchasing $100 worth of Bitcoin, you purchase $25 worth over a four-hour period.
Example-Bitcoin price varies, so let’s say:
12pm BTC = $30,000
1pm BTC = $30,500
2pm BTC = $29,000
3pm BTC = $31,500
Using the prices above, if you bought $25 worth of Bitcoin at every one of these times and price points your average price would be $30,250 per Bitcoin. If you are new to crypto you will soon realize prices change fast. If you don’t have the stomach to watch the price BTC drop from $40000 to $29000 in seven days it’d be wise to DCA into the market.
Strategies to Dollar cost average
There are many ways to accomplish a dollar cost average strategy. If you budget $100 a month to a crypto investment over a 12 month period, you will avoid huge price swings while building more crypto over time. Another option is using applications like coinbitsapp.com, swan bitcoin, or cash app. These are some applications you can use to set up reoccurring investments into bitcoin specifically.
Dollar cost averaging is an investment strategy. This is not financial advice, however, this is a strategy that I have used in my personal investing portfolio. If you don’t want to go all in at once, dollar cost averaging is a safe strategy to get started. Out.