We decided to start a new rubric for you, in which we will tell you about the different investment strategies. Let’s start with a strategy called DCA – dollar-cost averaging, which helps investors reduce exposure to market volatility.
DCA is a long-term strategy in which an investor regularly buys smaller amounts of an asset over a period of time, regardless of its price (for example, investing $100 in Bitcoin every month for a year, instead of $1,200 at once).
Let’s consider this in practice. If you invested $100 per week in Bitcoin from December 2017 to January 2021 you would spend $16,300 but your portfolio would be worth approximately $65,000 — a return on investment of more than 299%. However, of course the success of any strategy still depends on what happens in the market.
Benefits of DCA:
🔸 DCA can help an investor safely enter a market without fear of losing a large amount or investing in the wrong coin.
🔸 Cryptocurrencies can experience daily (or even hourly) price volatility. You don’t need to “time the market,” you just follow the chart.
🔸 You don’t risk unwittingly using all of your funds to invest “a lump sum” at a peak.
🔸 “Average” out the cost of purchases over time and reduce the overall impact of a sudden drop in prices on any given purchase.