"I invested in Bitcoin and lost almost 50%, do not recommend it." "Cryptocurrency is a very volatile market; I have lost a lot". "I'm thinking of investing in a crypt, but many acquaintances tell me that they just have been losing money".
We think at least once, but you have heard something similar. Indeed, cryptocurrency is volatile, but experienced investors know that there are several strategies for "conquering" this market.
One of them is the Dollar Cost Averaging (DCA) strategy. Using it, you buy the same amount of assets on a regular basis. If you want to make a profit without high risks and are ready to invest in the future, we advise you to take a closer look.
What DCA is: based on examples
Let's analyze how it works on the example of Bitcoin.
Imagine that you had a good financial year in 2021 and were able to put away $5,000. As a financially competent person, you want your money to work, so you decided to invest in BTC. On January 1, you make a purchase for the full amount and receive the following data:
In September of the same year, the price dropped to $20,000. That means that your 0.10 BTC is now worth $2,000. Losses are 60%.
Using DCA, you would invest $555 every month.
Thus, in September you would have 0.16 BTC — that's $3,200, so the loss was 36%, which is almost half as much.
Does it work on smaller amounts?
Let's take $1,000 and count according to the same scheme as indicated earlier. In January, you buy again for the full amount:
In September of the same year, the price dropped to $20,000. That is, your 0.02 BTC is now worth $400. Losses are 60%.
Using DCA, you would invest $100 each month:
Thus, in September you would have 0.035 BTC — that's $700, correspondingly the loss was 22.26%.
The main thing is that with such investments, the amount of the asset becomes larger, and when the market grows, you can get more money. Also, do not forget that the exchange rate changes and the dollar at the beginning of 2022 and the current dollar – are two different things.
What are the benefits of DCA?
1. You buy more when it's cheap, and buy less when it's expensive. This approach is insurance that when the market goes up, you will recoup your losses.
2. You reduce the average value of the asset (compared to the full amount at one time). As you saw in the examples earlier, buying a large amount at once is much more expensive.
3. You make a decision once and are not guided by your emotions. In an ideal world, it works something like this: once you decide to follow DCA, you don't change your approach for a long time. That way, market spikes don't affect you, and there's no sudden urge to sell everything before the price drops even more.
4. You develop the habit of investing. You will not study the charts of coins 24/7, but you will invest in them every month or week. This creates a useful habit with the help of which money is constantly working, and not waiting for its fate in a cryptowallet you forgot about.
Who is the DCA strategy best for?
This strategy is best for two groups of people:
1. You don't want to study cryptocurrency 24/7. Instead of waiting for the perfect market entry point, you choose a regular approach.
2. You don't have a lot of money. Not everyone has $1,000 to invest when market conditions are favorable. The $100 per month option is much more realistic.
"I decided on DCA, I want to start with Bitcoin. What is needed for this?"
You will need an Any.Cash cryptowallet.
Any.Cash is a multi-currency cryptowallet in Telegram. If you know how chat-bots work, then think that you already know how to buy Bitcoins there. This is the most convenient way to deposit a fixed amount every month. Two clicks in the messenger and your investments are in a safe place.
For beginners, we have made a step-by-step guide, so follow the link.
