How Dollar Cost Averaging Can Help In Crypto

in LeoFinance4 months ago

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How Dollar Cost Averaging Can Help In Crypto

Dollar cost averaging is something I ran into years ago in the stock market when I decided to start investing and stop buying dumb things. Any time I wanted to buy something I didn't really need I calculated in my head if it was worth it compared to what could be earned if invested today. I have to say this mentality has helped me launch my own business which is now mainly run by others and allows me to start pursuing ventures into the crypto field.

What Is Dollar Cost Averaging? (DCA)

In a world filled with volatility not only in the crypto field but now in the stock market more so than ever dollar cost averaging can be a smart way to counteract it. Many investors or new investors try to time the markets constantly and often time fail. Such as when to sell, when to buy at the bottom etc.

However with dollar cost averaging you simply invest regularly no matter what the price is (within education reasoning) For example I use to invest 20%- 50% of my paycheck depending on demands that month into crypto no matter what. At that time there was also only bitcoin so there wasn't many choices besides that and Ethereum a bit later. Buy constantly buying this asset and holding on to it I no longer tried to time the markets and instead simply kept stocking up. Sure some months I paid a premium and other months I ended up getting a bargin. But you know at the end of the day now years later ALL of those purchases have made huge gains and those gains can now be put to work in defi systems to earn even more.

More Examples Of DCA

To give you another idea for those in the working force think of it how you treat your 401k. Each paycheck you invest part of your paycheck into the 401k and buy stocks, ETFs etc depending on your selections. This selection is then invested into at the point of paycheck which means your buying at whatever the price of the stock is at that time. Most give it no extra thought after putting in the numbers and at the end of the year or retirement date you should have a sizable amount depending on how the markets performed.

Over roughly a 30 year period of time you should on average be at a higher amount which is why many investors use to tell you to invest into index funds. This is the track of the nasdaq over 30 years. Yes some down years but overall the positives in that time frame would have left you with more if you simply kept investing the same over that time frame.


Things Are Changing Quickly

However for me I believe those times are now gone for the most part. Many companies stopped their 401k plans, hardly have have pension plans and so far wages have not increased at all even thought the price of everything has gone up (this might be changing soon as many people during covid decided enough was enough and changed their ways).

Banks now pay 0.05% if you're lucky in most cases you earn nothing on it while they continue to loan it out. Not only that but inflation has now set in meaning every month if not daily you're losing buying value of your money if you're not making 6% APR.

The solution for this?

At least for me I see it being in crypto.

DeFi platforms - even large ones are paying hefty 10%+ APRs and while there is of course risk involved many are paying upwards of 40% such as CubDeFi

Stable coin interest - Right now many stable coins are paying 6% plus and should come with minimal risks. However they are not truly back by anything so if something happens your funds will be gone be careful where you invest and how you invest. Another powerful place we are seeing this is right here on hive with a nice 12% APR on the HBD stable coin. This beats inflation and holds your value in dollar value if not increases your buying power.

Gaming - Yep, you can actully earn a nice sum of crypto simply by playing games. Now be aware there is higher risk as the game could do a rug pull, the game could crash in demand or any number of things could happen that drive the price down. However there are some low cost or even free games you can get involved with to earn some passive income.

What other methods do you know of to earn crypto and build your net worth during these down turn times? Let me know in the comments.

Posted Using LeoFinance Beta


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