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Saturday 21st May, 2022
Every year, Bitcoin has grown into an important asset. Therefore the price of Bitcoin is always a topic in the news today, and it is also because the price of Bitcoin is volatile or can be called very volatile.
No one can know where the Bitcoin price growth will go like assets in general. No one knows for sure whether he will go up next year or even down. Everyone in the market can only predict the direction of the coin's movement.
Due to its volatile nature and difficulty to predict, one strategy is very suitable to be applied to this one asset; that strategy is Dollar Cost Averaging or better known as the DCA Strategy.
In this article, you will learn some important things about Dollar Cost Averaging, including:
Dollar-Cost Averaging is a way of investing by buying crypto-assets such as Bitcoin or other assets in a fixed amount, consistent with a set schedule, and without seeing the movement of the asset price up or down.
This strategy aims to take advantage of falling prices in the market without having to risk more capital first.
This strategy is considered better and safer than directly buying huge amounts of Bitcoin (Lump Sum strategy), and you can, according to your investment abilities.
When you use this strategy, you will not need the ability to read the situation of rising or falling in the market. Suppose you are serious about applying it according to the applicable rules. You will not be easily influenced by buying or selling investment instruments when the price is low or bounces up.
If you invest with this strategy, you will focus on a long-term strategy and not be afraid of rising or falling prices. You just need to stay consistent with the investment plan that has been set.
There will be two examples that you will get. The first is an example of implementing a lump sum strategy and the second example is the application of Dollar-Cost Averaging.
Suppose you plan to buy Bitcoin at the beginning of the year with $240,000 when the Bitcoin price is $400 per 1 BTC. That means you have accepted 600 Bitcoins ($240.00/$400)
And by the end of the year, the price of Bitcoin had risen to $450 per coin. So you get an ROI (Return of Investment) of 13%, meaning you get a profit of $30,000 because you have 600 Bitcoins, and at the end of the year, the price is $450 ($450*600 BTC = $270,000)
However, the results will be different if you use the Dollar Cost Averaging strategy. You routinely use it from your $ 240,000 money by buying Bitcoin for as much as $ 20,000 every month for 12 months, all that you do without caring to see if the price goes up or down.
Although the total capital is the same as in the first example, this strategy's results will be very different.
In this case, you are buying 641.56 Bitcoins because you are consistently buying (in this example, buying when the price drops).
Then at the end of the year, your assets are worth 641.56 x $450 = $288,702. You have made a profit of $48,702, a 20% ROI (7% more than the previous example).
With a dollar-cost averaging strategy, you will be able to reduce market risk and continue to build your investment portfolio over time.
Of course, Dollar Cost Averaging is a good strategy, especially if you do this strategy by researching the investment assets to apply the DCA strategy.
However, even without doing research, DCA can be used. The only thing you need to do is invest in assets with a promising future. Examples are cryptos with large market capitalizations, such as Bitcoin, Ethereum, BNB, etc.
But out of all that, these are some of the reasons why this strategy is an excellent strategy to implement, especially in the crypto market:
You need to know that doesn't mean that if you apply this strategy, you will automatically succeed in investing in the crypto market. But still, this strategy holds place as one of the safest strategies when the crypto market experiences strong fluctuation shocks.
Investment risks such as crypto-assets have very high price fluctuations and are sometimes scary to look at it. So for you to survive in the crypto market, you need good timing.
No one in this world knows for sure when the "good timing" will happen. So, to get that good timing, you have to apply the DCA strategy consistently and regularly.
Because by implementing it, you will repeatedly buy a crypto asset, so who knows, maybe one of your purchases is indeed an excellent time to buy. So you get the maximum benefit.
Because the fluctuations of the crypto market are sometimes terrifying, not a few of you will find those who are stressed or depressed because of the crypto market.
Some panic because the price suddenly drops drastically, and he has put all their capital into buying at the highest price. Some make short-term trades, and therefore their money runs out due to wrongly predicting the direction of the price.
Dollar-cost averaging will help you avoid things like that, and you don't have to worry about the market going up or down. You just focus on your rules and let the rest of the market decide how much profit you will get.
If we look back, we will find that crypto is like any other market, which has cycles that occur repeatedly. There are times when the price of crypto, especially bitcoin, has increased, and there are also times when it has decreased.
Source: Tradingview.com
You can see that Bitcoin has gone through the same cycle repeatedly; that is, it goes up and down, but we can all agree that the rise in bitcoin itself is far more significant and far more extraordinary than the decline.
Dollar-cost averaging is like a strategy designed for markets such as bitcoin or another crypto; by applying DCA, you have the potential to earn hundreds of percent still.
All you need is consistency and extra patience because the DCA strategy is a strategy that focuses on the long term. You don't have to pay attention to temporary price movements in the market.
Dollar-Cost Averaging is suitable for long-term investors who want maximum profit with lower risk. This strategy is also ideal if you're going to apply it in a highly volatile market like Bitcoin.
And you need to remember that this strategy does not guarantee you get a huge return on your investment. The most important thing is that you don't put emotions forward in buying and selling and consistently look at investments in the long term.
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