How to Dollar-Cost Averaging Buy and Hodl Cryptocurrency Like A Boss
There are many occasions that I’ve been talking about investing in cryptocurrency, as I believe I have been a part of the Cryptocurrency scene for a significant amount of time. More than 5 years. Now, if you have been in the scene for a long as I have, you would know that the price of bitcoin changes very often. There are many Bitcoin enthusiasts who buy the dips and sell the highs. Or in more simple words, they buy when it’s cheap and they sell when the prices are higher. This has its own risks, but people who invest for a long period of time, i.e. HODLers, do not face those same risk, and I will explain why. Now, these investors, like I already mentioned, purchase a small amount of bitcoin and use a strategy called “dollar-cost averaging”.
What is Day Trading Bitcoin and Intra-Range Strategies and are they risky?
It is easy to understand but hard to stomach. If you have bitcoin, you should wait until it reaches the highest point and then sell them before they dip. This is a flip. Buy when it’s low and sell when it’s high. When it lowers again, they can buy again but now they are able to buy much more at the lower price and get more value. Many use their guts to estimate where they think the price is the highest and when it reaches the lowest. You can play this game a few times a month, or you could make a career out of doing this daily and trading cryptocurrencies.
How are your nerves though?
There are risks that can leave traders high and dry though. One of the risks tethered to this kind of exchange is leaving funds on a trading platform, which can cease operations in a blink of an eye. The bitcoin price doesn’t follow most predictions, and you may miss the highs and lows and lose a huge amount of funds forecasting the wrong market events as well, costing you significantly.
Are you still with me?
Dollar-Cost Averaging: The Hodler’s Choice
The HODLers are looking for long term gains. They use a strategy called “Dollar-Cost Averaging” or DCA for short. They are believers in the long-term progress of bitcoin and other digital assets. Using that DCA method basically means purchasing a fixed dollar amount of bitcoins, no matter what the price is and whatever gains or loss that the price happens to be experiencing. Furthermore, the DCA technique requires purchasing the fixed dollar price using a scheduled calendar as well.
Being a HODLer has its good sides, i.e. it’s less stressful than those who day trade or play intra-range strategies. As a long-term investor, you simply purchase bitcoin or other cryptocurrencies using the DCA technique and don’t have to watch the charts all the time. There is no need to set price alarms to catch rises and dips exactly as they happen. DCA investors are investing in the digital asset for the long run, and everyday price volatility is meaningless to the holder to a degree. It’s simple, purchase the coin, sit back and wait the time when it will return your investments in the way you are pleased.
Another aspect of buying a fixed dollar amount using a schedule means the investor doesn’t have to transfer funds to an exchange or keep funds there for faster trades. DCA investors can keep their assets in cold storage, in this case, hardware wallets and only send when they are ready to sell.
Holding Cryptocurrencies for a Long Time Seems to Be Paying Off
Dollar-cost averaging isn’t for everyone. There are believers that buying dips and selling at tops is far more profitable as an investment. However, let’s face one thing that DCA is a safer method of investing because it’s less stressful and you don’t have to keep your money on an exchange or pay lots of fees to send assets to a trading platform.
In other words, using the DCA method, users can get an average cost of their overall investment over time. With the way things have been going with the cryptocurrency world and their prices, it seems that holding this digital asset for the long term has been a profitable investment.
What is your strategy for making a profit via cryptocurrencies? Which cryptocurrency have you invested in?