The Ultimate Crypto Investing Strategy - Dollar Cost Averaging

in LeoFinance3 months ago

Have you ever wondered what the ultimate crypto investing strategy is? Stick around to find out. Its simplicity will blow your mind.


Dollar Cost Averaging

Maybe you've heard someone say "dollar cost average" before, maybe you already know what it means. That's totally fine. We're here to talk about how it truly is the ultimate investing strategy when it comes to cryptocurrency. The same method of investing can be applied to many different things such as stocks and precious metals as well.

So, what does dollar cost averaging mean? In simple terms - it means investing small amounts over time into a specific asset to hedge against volatility. Let's use buying HIVE as an example here - instead of throwing $1000 into the asset in one single trade, you could decrease risk by buying it in 10 $100 chunks over the course of a certain period of time.

What this does is gives your investment cost an even basis. Say you put $1000 into HIVE at 85 cents and the price dips for 75 cents over the next 3 weeks. Your 1,176 HIVE is now worth $882 and you're down 12.5% over 3 weeks.

If you had taken the same $1000 and bought $100 worth of HIVE every other day for 3 weeks... Considering the price was steadily going down, your average buy price was also going down. This would mean that you would end up with more HIVE and you would be down a lower percentage overall on your investment.


So now that we've established what it means to dollar cost average, let's dive into why it's so powerful. Typically when people think about cryptocurrency investing or trading, they think about drawing lines on charts. They think about having a dual-monitor setup and watching the 5 minute charts like a hawk to try and time the market to make the best trade.

Unfortunately, we're not all professional traders. I personally feel like professional traders are often just really lucky based off educated guesses. I'm not saying it's impossible to make a good guess as to which way the price of an asset is going to go. I'm saying, for the average investor that can't sit in front of their computer and watch charts all day... There's a better and much safer way to invest.

Time in the market will always beat timing the market. I can tell you from personal experience. You don't want to drop $5000 into an asset hoping it's going up and lose 50% when it dumps. You want to slowly invest, that way if the asset dumps, you're getting it cheaper and cheaper on the way down.


Looking at the above chart for HIVE's price as an example. If you had invested $5000 at the first arrow, you've be pretty sad right now. You'd be down around 60% on your investment which definitely hurts. I'm a crypto veteran that has been through a lot of dips and harsh sell offs but 60% still hurts pretty bad. So your $5000 is now worth around $3000 but you've got diamond hands so you'll be ok.

Imagine if you had taken that same $5000 and bought in chunks of $833 over the course of the same time period at the 6 different arrows marked on the chart. Not only would you be down around half as much on your investment, but you would have a ton more HIVE because half of your buys are at prices around 1/3 of your initial buy.

I'm not gunna sit here and do all the math for you. It's easy to see when you look at the chart example above which strategy was better. You might see the difference now and pose the objection "but that's so much work to do so many buys!"

While that could be true, there are plenty of exchanges like Coinbase that offer automated recurring buys. You can set them up daily, weekly, bi-weekly, and monthly. All you have to do is set the amount you want to buy and how often. The exchange does the rest.

While I don't support most of these big exchanges, they do offer people that are new or just wanna get their feet wet a way to invest. Why even worry about looking at a chart and getting confused when you are automatically buying no matter what the price is?

Less stress. Less risk. Peace of mind. Crypto trading can be stressful but it doesn't have to be. Dollar cost average your way to financial freedom.

Thanks for reading! Much love.

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This is a good strategy,I believe Les risk can be greater returns but what if the market did the opposite, what if the price going up instead of dipping, what if I miss that opportunity of not investing all at once

You may have missed out on one big jump, but remember... Investing is a marathon, not a sprint. You will always win with DCA.

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Amazing dollar cost averaging is a real thing thanks for sharing friend 😃

thanks for stopping by

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