Cryptocurrency is becoming an important part of the investment portfolio right now. With many different cryptos, you are not short of options of where to put your money. Even with controversies such as the FTX scandal, crypto is still here with us and here to stay for the future.
However, as we have come to understand, investing in crypto is a very risky affair and you need to take calculated risks more than you would.
This is where Dollar Cost Averaging comes in.
What is Dollar Cost Averaging?
The phrase dollar cost averaging refers to the investment system in which you invest a fixed amount of money at a given investment at regular intervals, for example monthly or quarterly (once every three months).
So, for example, there is a cryptocurrency, let’s say, Bitcoin, selling. You decide to buy $200 worth of the coin at different times. Afterwhich, you will pay the fixed $200 each time regardless of the changing prices of the currency. You will do all this until you exhaust all the money you set aside for that investment. When the prices begin to rise, and rise to a point you feel you can make a profit, you then look to sell them. Alternatively, you can trade with the coins that you own.
Buying DCA often means buying when the currency is showing a price decline. This is called the bear market. When prices are declining, you invest here in the belief that the prices will rise again (bull market) thus meaning that you sell higher and therefore, yield profits.
Why DCA is Good
The best reason why using DCA to invest in crypto is good is because it mitigates against large losses. Rather than put all of your money in an investment all at once, with DCA, you put small amounts of money in that investment, thus, meaning that even when you lose, you lose only a small portion of your money. It’s several other benefits can be found here.
With cryptocurrency still being highly volatile, DCA is the best way that you can make your investment in the digital currencies.
