Dollar Cost Averaging in Cryptocurrency
- Thread starter Golden9
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You are right, the DCA strategy is used in long-term investment instruments, because this strategy is very easy and simple to practice. The main goal is to minimize risk, you can invest regularly and in a fixed amount, thereby reducing the emotion of investing large amounts.
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- #23
On the contrary, it works best. For example, someone who started DCA into Bitcoin from the beginning of 2022 would not be in profits for.what was bought earlier, but the coins bought towards the end of the year would have doubled now in profits, and it would surely be profitable by the next bull run.
DCA is meant for a long term strategy, If you start buying Bitcoin from January 2022 if it reaches May 2023 it means there are 17 months, and you buy Bitcoin every 1st. Then the Bitcoin Price on January 1, 2022 is $47,686, Feb $38,743, March $44,354 etc .....May 2023 $28,091. For example if the average price plus fees is $39k then this is the cost price, So if you sell Bitcoin at $50k then you will make $11 profit.
Yes, totally, the fact of investing periodically a fixed amount takes away the stress of thinking about the large amounts you could invest if you did not follow this model and it would be a little more unstructured.
The DCA strategy is very easy to use by anyone, even by beginners, investing is more regular and can reduce risk, however, the DCA strategy also has several weaknesses, if prices continue to rise, the profit we get will get smaller.
It is not advisable in this market the way it is turning out. Just hold your funds for now in a stable coin let the market have some form of stability.
Why sis?, we have to hold funds in stablecoins, isn't our goal investing to make a profit from price fluctuations, loss in investment is a risk, and we may not have to wait for market conditions that will never be stable.
There are times that you are about 60% sure you would make profits from buying a cryptocurrency. Now, it is about 20% because it takes seconds for everything to dip now.
A long term investor need not worry about the current price fluctuations, that is the function of the DCA strategy to collect crypto, and the crypto price will repeat itself and print new ATH especially after the Bitcoin halving.
I know this. That is why I always tell people to invest in cryptocurrency and just forget it. If you are a short term investor, you might end up developing high blood pressure from the volatility.
Cryptocurrencies are not pegged by the USD, but the USD as a world currency is very influential on commodities including gold and crypto, if the USD weakens, crypto will rise and vice versa if the USD strengthens, crypto prices will fall.
I learnt about dollar cost averaging in Binance. Their auto invest feature uses this strategy and it is a great one for long term investors. If you do it well, you can accumulate so much wealth.
True, but I use to think that with dollar cost averaging, the risk involved might be very minimal, though I'm yet to fully grasp the concept of dollar cost averaging, I hardly implement it would I say use the strategy for trading.
It is easy to understand, it is to set a budget of money in a specific time frame and always invest that amount, this is to accumulate in the long term no matter on what price the asset is in the moment, imagine that you want to invest in BTC for 4 years without selling and you have a budget of $ 5000, and you want to invest monthly, 4 years are 48 months, $5000/48 months are $105 more or less per month of investment, that's a DCA or Dollar cost average.
now I understand what you saying in actually it is a very good way of investing because if one does not spend the money they are investing we didn't that set amount of time they will even get more especially if they get too invested in Bitcoin.
Yes, indeed, it is a very good strategy for assets such as Bitcoin, Ethereum, gold, stock indices or other large-cap assets that tend to appreciate after a few years, I recommend it a lot.