The global financial market is far from stable.
Just a year ago, things looked much brighter but it seems like the double-digit returns of last year will be hard to repeat. As Bloomberg reports, many market analysts predict that investors are going to earn a lot less in the following 12 months.
That’s why so many investors are turning to dollar-cost averaging (DCA). With this method, you take and invest equal amounts at regular intervals. That way, you’ll get the best possible deals on your investments by accounting for market fluctuations.
But can this investment method work with Bitcoin?
Read on, to find out…
- What dollar-cost averaging is.
- How it works in the crypto market.
- What it looks like in action.
- The pros and cons of DCA.
At NordikCoin, we want you to get the best possible deal on Bitcoin. That’s why we’ve put together the safest and most convenient exchange that allows you to buy Bitcoin in a matter of minutes and at the best rates.
What Is Dollar-Cost Averaging?
With dollar-cost averaging, the investor takes a certain amount of money and invests it at set time intervals. By doing this, you eliminate all of the guesswork from the process and stop worrying about the market timing.
That allows you not to worry about “timing the market” and placing the right investments at the right time.
The amount of money you invest always stays the same. That allows you to purchase fewer shares when the market price is high and more when it’s low. Your goal is to have more shares bought at a lower cost over time — simple as that.
How Does Dollar-Cost Averaging Work in the Crypto Market?
If you’ve been into Bitcoin for more than a year, you know that the price can fluctuate on a daily basis. Many Bitcoin users buy coins when the price dips and sell them when the price goes up.
For example, if a person buys Bitcoins at a low entry point and the price grows by 10% and sells them at that piece, they can make a good profit. You can do this for a few months or make a career out of it.
When it comes to the “regular” financial world, purchasing $10 worth of stocks is a form of DCA. In the world of Bitcoin, however, you need a little more money to noticeable return on your investment.
What Does Dollar-Cost Averaging Look Like in Action?
It can be a bit difficult to understand how dollar-cost averaging works, so it’s understandable if there’s still some confusion around it.
Let’s look at an example of this investment method to make things clearer.
In January 2018, a single Bitcoin was worth approximately $13.8k per coin. Let’s say two people decided to start investing in Bitcoin during that period. Person A invests a lump sum and buys $5k worth of coins all at once. Person B uses the DCA method and buys $500 over the next 10 months.
After 10 months, person A will own 0.36 Bitcoins while person B will own around 0.61. And keep in mind, both of them invested the money at the same time. But now, Person B owns almost twice as much Bitcoin than Person A thanks to dollar-cost averaging.
What Are the Pros of Dollar-Cost Averaging?
As you can see from the example above, DCA can bring in a good amount of money in a relatively short period. What’s more, it’s far safer than investing all of your money at once. But there are some more upsides to DCA that you should know about.
1. Low Initial Investment
The strategy is constructed around the idea of making small, regular Bitcoin purchases. Unlike other investing methods, DCA doesn’t require you to have every penny on the line since day one.
People who don’t feel safe investing their savings into crypto can set aside small amounts of their paychecks every month and see whether or not their investment pays off after a while.
2. You Have Time to Learn
Everyone who’s held on to their Bitcoins for the last four years has made a profit on their initial investment. If you take the time to understand Bitcoin and the crypto market as a whole, you’ll make smarter moves and increase your chances of making a profit.
In other words, DCA allows you to learn about Bitcoin at your own pace.
3. Less Stress
Losing all of your money is not an option with DCA. You can rest assured that your investment will increase over time. With other investment methods, price swings can be catastrophic for your bottom line.
What Are the Cons of Dollar-Cost Averaging?
No trading method is risk-free. Let’s just get that out of the way. So with that in mind, let’s have a closer look at some of the downsides of DCA when you want to invest in Bitcoin.
1. It’s More Expensive
Just how DCA prevents investors from investing all of their money at the top, it also prevents them from doing the same at the bottom. Even if you execute the strategy properly, you’ll always end up buying Bitcoin at a higher price.
2. You Need to Wait for ROI
Dollar-cost averaging requires you to be patient and to not make big investments all at once. If you want to invest in Bitcoin to make a quick buck, then this isn’t the way to go. You may have to wait between 6 and 12 months for a return on your investment depending on the investment structure.
3. Potential Low Performance
If the Bitcoin price goes up then it’s a good idea to invest as much as you can. Then sell your coins a few weeks later and make a lot of money in the process. You won’t be able to do that with DCA and that means you may miss out on a huge opportunity to turn a profit.
Is Dollar-Cost Averaging for You?
When it’s all said and done, you have to realize that DCA isn’t for everyone – both in the financial and the crypto world – and that there are quicker ways to make bank from investing.
That said, most investors would agree that dollar-cost averaging is one of the safest investing methods. It requires less money from the get-go, involves fewer fees, and is far less stressful than any other investing strategy.
People who use dollar-cost averaging can get an average cost of their investment back after a while. From the look of things, holding on to your digital assets is and will remain the best investment option for Bitcoin traders for the foreseeable future.
Where Can You Try This Bitcoin Trading Strategy?
Head over to NordikCoin now to claim your free and encrypted Bitcoin wallet today. It’s incredibly easy to create an account since you just have to sign up with an electronic ID — and then you’re ready to trade.
You can buy Bitcoin with both VISA and Mastercard, and try out DCA for yourself. All you have to do is choose the amount of Bitcoin you want to purchase, enter your card details, and then you’ll have Bitcoin at your disposal — instantly.
Once you’ve made a killing, we’ll also connect you to thousands of online stores that accept Bitcoin so you can reward yourself for a job well done.
Why choose NordikCoin?
Because we’re not only really enthusiastic about Bitcoin — we also know what we’re doing! Our team is made up of technologists, auditors, and lawyers. So you can rest assured that we understand both the technical, financial, and legal side equally well.
We also take the security of our users very seriously. In addition to the use of electronic ID solutions, we also take pride in our cold storage solution that requires multiple signatures to access. You can always rest easy that no one has unauthorized access to your Bitcoin.
So, are you ready to try out dollar-cost averaging?