How the dollar cost average works for bitcoin investments

This strategy will change the way you invest in the cryptocurrency market.

Bitcoin is expensive in the cryptocurrency market. Not everyone can afford Bitcoin and people who can reap the rewards, which makes the critics jealous. But there is one way that anyone can invest in Bitcoin cheaply. Known as Dollar Cost Average, it is an investment strategy that can lower the amount of Bitcoin and minimize risk. The logic is simple: rather than investing huge sums of money at once, the dollar cost average refers to buying small amounts on a regular basis despite the price. Over time, this method will result in higher returns.

Dollar cost averaging

This strategy manages price risk when buying large assets like Bitcoin. Instead of buying an asset in a single purchase for one price, dollar cost averaging divides the amount that must be invested to buy small quantities on a regular basis. This will reduce the risk before the price drops.

The dollar cost average only works for long-term investments where asset prices tend to rise. In the short term, asset prices don’t change constantly. Instead, the short-term highs and lows the market is experiencing do not follow any predictable pattern. When the price is low, many investors have tried to time the market and buy assets. But according to professional stock pickers, that’s easier said than done.

The dollar cost average makes investing more practical and less emotional. It results in an investor buying fewer assets when prices are high and more when prices are low. Speaking of practicality, this method will help crypto investors who only have small amounts to invest. Often times, such investors do not turn to Bitcoin as the price is always higher than any other cryptocurrency on the market. Even if the price goes down, the prices of other cryptocurrencies like XRM, Litecoin and Bitcoin Cash will be lower than the market leader in cryptocurrencies. The average dollar cost regularly brings a smaller amount of your money to market. In this way, an investor does not have to save huge sums and wait for the time to come. In dynamic markets like cryptocurrency, where price volatility is a huge disadvantage, waiting for the right time can take away so many opportunities to generate profits. Instead of crying over spilled milk, averaging cost is an expert method to avoid mis-timing.

How does it work?

The dollar cost average can be broken down into two components – the fixed investment amount and the regular interval to invest that amount.

For example, let’s say the fixed amount to invest in is $ 100. Here’s how you can afford to take risks in the cryptocurrency market. In your first month, you spend $ 100 to buy a fraction of Bitcoin. As you keep investing this amount each month, you will find that in a few months’ time you will be able to buy more bitcoins due to price volatility. That way, when you have a five-year goal, you are consistently funding your investments for those five years and investing money in the market rather than timing it. This is an effective strategy in the cryptocurrency market. The same can be used for Ethereum, Binance Coin, Ripple, etc. Another important aspect to consider here is choosing the right asset to invest in. This requires special research and analysis. The dollar cost average only works if you continue to invest in a particular asset. So choose the most reliable option to protect your investments.

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