Bitcoin prices and a number of other digital assets have appreciated significantly in value over the past decade. Some people made millions and even billions by throwing away everything they had in the earliest days of cryptocurrency pricing. However, there is another investment method called dollar cost averaging, or DCA. This scheme is considered to be far less risky and can bring a cryptocurrency investor decent profits in the long run.
Since Bitcoin topped the all-time high (ATH) of crypto assets in 2017, the digital currency has continued to rise in value after crossing the $ 20,000 zone. Then Bitcoin (BTC) tapped a new ATH ten days ago after the crypto asset topped the $ 42,000 area. Additionally, a number of alternative digital assets are nearing their 2017 ATHs, and some newer coins such as Polkadot and Chainlink also hit price highs.
Now there are many people who got early investing in Bitcoin, Ethereum, Bitcoin cash, and many other coins and this has brought these risk takers significant profits. However, there is another investment method that people have used for a very long time, which is dollar cost averaging, or DCA.
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Essentially, the DCA purchase method involves buying a set amount of cryptocurrency at regular intervals. This contrast is very different from throwing away all the funds at once and waiting for profits. An example of buying DCA would be buying Bitcoin worth $ 10 per week for a period of three years or more.
Buying this way is seen as less stressful on the emotions and far less risky. The planned purchase intervals take place at this point in time, regardless of the cost of Bitcoin (BTC) or other cryptocurrency. If you then aggregate the number of purchases per week and the standard price from the purchases over the three-year period, the average cost of investment is measured.
In addition, depending on the market performance of the crypto asset, a DCA investor can do much slower and less risky for themselves.
There is also a website where you can estimate the interval of purchases over time and the average value over time. The dcabtc.com web portal has a calculator that can help you determine your DCA metrics over time. If you have already used DCA investments, you can check the return on your current BTC investment.
Here is a great example of buying DCA over time, investing $ 1 a week in BTC over the past nine years. Dcabtc.com states that since January 2012, buying $ 1 BTC every week for nine years starting nine years ago would have made $ 470 to $ 289,295 using today’s exchange rates. That’s a whopping 61,452% increase in value over nine years.
This graph shows a DCA Bitcoin investment for a period of three years with a purchase of $ 10 per week.
If the person had started three years ago and had invested $ 10 a week in BTC every week for the past three years, they would have seen a 361% increase. This method of buying DCA would have turned $ 1,570 into $ 7,249 over the three-year period. Of course, the amount of time you start investing makes a difference for both DCA and dumping all funds at once.
Timing is key, and sometimes earlier it doesn’t make a difference due to bitcoin price fluctuations. A good example of this is when someone invested a large sum in BTC on March 12, 2020, at a low of $ 3,800 per unit. Using today’s BTC exchange rate shows that the investment would produce a whopping 821% over time through January 17, 2021.
Averaging the dollar cost is still far less stressful as a person can invest without putting a lot of emotional energy into playing the lows and highs like the flat-rate investment above. DCA investors don’t need to invest a lot of time and effort studying market charts, keeping an eye on crypto-related news, and keeping an eye on the heavyweights of the industry. Funds are simply invested without much time consuming activity and the investment can be calculated over long periods of time without much worry.
The crypto investor anticipating a DCA approach does not care that the market is unpredictable and the stress that is relieved by trying to time crypto markets is insurmountable. It takes time and research to throw it all away at once and trade cryptocurrencies successfully. Some people just don’t have the time to apply.
A DCA investor knows that the price of Bitcoin changes very often and it can be difficult to hit highs and lows. However, long-term perspectives, logarithmic growth curves and the overall rise in interest show that holding digital assets for a long period of time has been an extremely profitable investment vehicle.
What do you think of the averaging of the dollar cost? Do you use this investment method or do you trade highs and lows every day? Let us know what you think in the comments below.
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