How To Mitigate Crypto Risk With Dollar-Cost Average
The crypto ecosystem operates on market cycles.
At some points, the direction of the market is clearly bullish, with crypto-asset prices regularly reaching all-time highs.
While at other times the direction of the market is less clear and more volatile. In this cycle, asset prices might seem to be rising one day and the next day their prices dip aggressively.
In situations like these, it is easier to time the purchase of an asset wrongly i.e. buying an asset when you think that the price of an asset would rise but instead the price dips, putting your investment in the red.
An investment strategy that is often recommended in situations when the direction of the market is unclear is Dollar Cost Averaging (DCA).
Let’s start from the very beginning of any class;
What is DCA?🤔
DCA (Dollar Cost Averaging) is the practice of investing a fixed amount of money at regular intervals. For example, investing 10 BUSD every week into a crypto asset.
Why DCA?💬
- DCA has proven to be a rewarding strategy. For instance, if you bought $10 worth of BTC weekly for the last 4 years, you would have spent $2,090 and you would have $8,938 worth of BTC today.
- DCA is like an icebreaker, it helps to ease your entry into the market so as to minimize the risk of bad timing. For example, if the market dips, you wouldn’t be as adversely affected because you are investing on a regular interval, you’ll be able to buy the dip, which in turn lowers your overall break-even price.🤯
- DCA involves reduced screen time and the time commitment that come with day trading.
- DCA is a passive investment strategy and does not require complex technical analysis skills.
How To Begin Trading with DCA?
Now that we have gone through all the basics, let’s discuss how to implement this in crypto using the Bundle app 💪🏾
- Identify an asset you want to apply the DCA principle with, e.g BNB, ETH, BTC, etc.
- Decide on how much you want to spend on DCA for your chosen asset. e.g 10 BUSD
- Decide on a fixed interval to buy (e.g 10 BUSD weekly, 5 BUSD daily, etc).
- Add the decided amount to your Bundle wallet using Cashlink and buy the chosen asset.🚀
Just like that, you are a certified DCA strategist 🎊
