What is Dollar-cost averaging (DCA)?
Dollar-cost averaging (DCA):
If you don’t understand cryptocurrencies, it’s not a big matter. I’ts actually a matter of time. Many people have a vague feeling that prices of financial assets (cryptocurrency) will grow, but are not sure how much potential there is or whether the uptrend will continue. If you are one of those people, why don’t you try the “dollar-cost averaging” method of investing in small amounts and take the time to deepen your understanding?
Your interest will grow as you actually invest your money, and you can increase your allocation once you are confident. This article will introduce you to dollar-cost averaging for cryptocurrencies.
What is dollar-cost averaging (DCA) exactly?
The dollar-cost averaging method is an investment strategy in which you divide the investment in smaller sums instead of making lump sum investment at one time . For example, you can decide to buy $5,000 worth of bitcoin every month, and keep buying at a fixed amount without worrying about market fluctuations. This is said to be an investment method suitable for beginners because it allows you to start investing with a small amount and limit the risk of loss.
Why is the dollar-cost averaging method suitable for cryptocurrencies?
Spreading the cost is a less psychologically demanding method of investing than putting all your assets in at once. By spreading out the timing of your purchases, you buy more when the market is down and less when it’s up, leveling out the average cost per share.
Cryptocurrencies are very volatile, especially in early 2022. However, it has seen many significant drops of over 20% in the last three months alone, and each time, there are whispers that the bullish trend is about to end. If you’re putting the majority of your investment budget into cryptocurrencies, you’ll be looking at the charts several times a day, worrying about the price movements.
Dollar-cost averaging is primarily about building a large asset base over a long period, such as 10 to 20 years. Even if the amount you save per period is small enough not to put a strain on your finances, you can increase it significantly by continuing to save for a long period of time. Even if you don’t have a lot of money on hand, this is a great way to start investing now.
Virtual currencies, including bitcoin, do not require a large amount of money like stock units. The minimum order unit varies from exchange to exchange, but you can usually start investing from a few hundred dollars up to about $1,000.
During the past few years, many have been interested in crypto-market but have missed the opportunity to buy. In such a situation, one way to start is to invest in savings accounts. By spreading out the timing of your purchases, you can reduce the risk of price fluctuations, making it an easy service even for those with little investment experience. It is free to open an account with a cryptocurrency exchange, so take this opportunity to try out the services of each exchange.