Dollar Cost Average: How does it Work for Bitcoin Investments
Despite the fact that the crypto market is growing at a rapid pace, prices for each coin are also generally rising. While this is certainly good news for people that have been in it for the long run, it can be hard for newcomers to get in. Bitcoin is pricey, and not everyone can afford it. But being the poster child of the entire market, everyone wants a piece of that cake.
However, regardless of its very expensive price, there is a way that people can still buy Bitcoin. The dollar-cost averaging method allows traders to buy expensive coins like Bitcoin without having to make a massive investment. And the logic is simple, instead of buying tokens in bulk, just buy some at regular intervals. While it may seem unorthodox, it does lead to increased returns.
The main purpose of dollar-cost averaging is that it helps you better manage larger assets like Bitcoin. Simply put, instead of buying one token in full, this strategy will have traders buying it in 10 or even 20 intervals. The best part about the strategy is that it almost always ensure greater returns. If a trader times the market right and only buys when the price hits a low, they will be getting back more than they paid.
Of course, this is a strategy that best suits assets that go on for a long time or long-term investments. These investments see a lot of fluctuation, which can allow traders to get earn more than they paid. On the short-term side, however, prices do not have a consistent pattern. Therefore, they can fluctuate considerably, making the act of guessing and timing the lows much harder. Many investors try to time the market in short-term stocks. But many professionals share the sentiment that it is easier said than done.
Since emotions can often get in the way of people making sound investments, dollar-cost averaging helps reduce the role emotions play. Traders will make practical investments by watching the market and buying tokens. They will also have to make sure that they buy more tokens when they are cheaper and fewer when the prices rise.
The dollar-cost averaging method stands on two pillars, the amount you will pay every interval and the interval when you invest. So if you set an amount of $50 every week, some weeks you can buy more fractions of Bitcoin. On the other hand, due to price volatility, some weeks you might not be able to get the fractions or might get significantly less. Regardless, you are still risking a lot less.
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