Seasoned Bitcoin (BTC) investors know that the cryptocurrency market is cyclical, and After the price of Bitcoin crossed its all-time high, a full upward cycle began.
According to Coinmarketcap, Bitcoin’s market cap is currently $ 439,870,808,850.
As this new cycle consolidates, the mainstream media is full of articles about Bitcoin and everyoneFrom world-famous investment gurus to Uber drivers, seem to have an opinion on the best tips, tricks, and profit coins to buy for instant wealth creation.
Much like the latest bull market, this one too will be riddled with messages from crypto Twitter celebrities who somehow managed to turn $ 100 into $ 10,000 or more.However, this is not necessarily the experience of most cryptocurrency investors, who are often exposed to the whims of the cryptocurrency whales and the uncontrollable fluctuations in prices on exchanges that offer cryptocurrency derivatives.
For the average investor with limited time and a full-time job, day trading is not an option.. In addition, the data shows that the majority of high frequency traders are not making significant profits.
Although some may have the time to research legitimate crypto projects and do basic and technical analysis, this can quickly become a full-time job in itself..
Fortunately, there is a much easier and more effective way to trade Bitcoin during bullish and bearish cycles This tactic is known as dollar cost averaging.
The data shows that the average cost of the dollar is best for Bitcoin accumulation
For the average investor looking for a simplified approach, several studies have shown this The mid-dollar cost of Bitcoin purchases has provided a return on investment that most funds have boasted of.
As shown in the graph above, an investor who bought $ 1,000 in 2017 has increased the value of their portfolio significantly outperformed all traditional markets in the 3 year period.
This buy and hold strategy is a tried and true way to invest in BitcoinBut not all investors are comfortable pouring a large amount of money into an asset as volatile as Bitcoin.
For risk averse investors, dollar cost averaging is an even safer way to invest in asset risk..
Dollar Cost Averaging (DCA) is a well-known investment technique that big investors like Warren Buffet have touted a way to invest in volatile markets. Although the “Oracle of Omaha” specifically referred to buying large index funds, it also applies to cryptocurrencies.
Instead of taking a lump sum and investing it all at once, an investor would break up the larger amount into smaller amounts and then invest those smaller amounts regularly over time.. The idea is that while it can be difficult to determine an upper or lower market limit, Regular shopping offers the best average entry price.
For example, with the Bitcoin DCA tool, an investor can see that the $ 100 invested weekly in BTC since the all-time high in December 2017 is currently in a portfolio of $ 40,867 at the current value of Bitcoin. As can be seen in the table below, a total of $ 15,700 invested over the course of $ 100 per week resulted in a 160% increase in value over three years.
The DCA is used by large funds to facilitate access to new positions
Even Large institutions use this strategy to increase their exposure to Bitcoin and Ether.
More recently Micro-strategy caused a stir in the world of cryptocurrency and traditional investing when its CEO Michael Saylor announced the company had bought over $ 425 million worth of Bitcoin and made BTC its main reserve currency.
Speaking of takeover on Twitter, Saylor explained::
“To acquire 16,796 BTC (announced 9/14/20) we continuously traded 74 hours and executed 88,617 trades, approximately 0.19 BTC every 3 seconds, BTC worth approximately $ 39,414 per minute, but we were ready anytime To buy $ 30-50 million in seconds if we’re lucky with a 1-2% increase down. “
Although this is clearly an institutional example of DCA as Saylor has described, smaller trades were spread over time to get the best average price for the given period without causing a noticeable surge in the market.
Slowness and consistency have shown they will win the race
Daily traders (day traders), investment professionals, and crypto celebrities Twitter often post screenshots of their trades that get any investor into Bitcoin. However, this has not proven to be the most effective method.
The data reflects disappointing statistics for day traders 80-95% of day traders lose money. This number applies not only to cryptocurrency markets but also to all trading markets.
So the next time you see that eye-catching announcement or email newsletter that guarantees massive wins and foolproof cryptocurrency spikes that are sure to be the next winning coin for the low price of $ 1,000 per month, Keep in mind that averaging the dollar cost is a more reliable way to periodically accumulate smaller amounts of Bitcoin.
It may not be flashy or devastating, however It’s a reliable and prudent approach to creating long-term wealth.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading step is associated with risks. You must do your own research when making a decision.
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