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Introduction
The markets are down pretty much all across the board. Within the realm of crypto, Bitcoin is trending down towards 30k with pretty much the entire market following that trend. When things get red, you can either be very upset because your book value just depreciated, or you can be very excited because you are getting the opportunity to accumulate a token you already believed in at a lower fiat price.
I am writing this post as a reminder to everyone (and to myself) that some of the most successful moves in cryptocurrency historically have been those almost devoid of emotion. Those who find success have had a plan and have stuck to it despite the noise and market movements. Many of these people employed the strategy known as dollar cost averaging to find their success.
What Is Dollar Cost Averaging?
Here is an actual definition I found.
Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset's price and at regular intervals. In effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices. - Investopedia
It is important to note that the goal of dollar cost averaging is to quell the impact of market volatility because you are getting tokens at a different price each interval. If you go and buy $5 of Bitcoin every day, there are some days where Bitcoin price may be around $35k and some where it is around $30k; spreading out your purchases to a set interval will help you find an average acquisition cost somewhere in between those fluctuations.
Why Do It?
One of the most frustrating aspects of crypto in my opinion is the feeling that you get when you either just missed out on a really good situation or just found yourself in a bad one. Some days are going to be better than others, just as with our lives outside of any financial markets.
We always speak of consistency when blogging and engaging on web 3.0. sites, why not find that consistency in all aspects of our financial (and in general every aspect of our) lives. If we are using dollar cost averaging, we can be sure that we will ride with the ebbs and flows of the market instead of being bothered that we jumped on at the wrong point.
Dollar cost averaging is something that can help you avoid massive frustration with yourself and with your investment strategies because it fully takes analysis and emotion out of the equation. Pick it, set it, buy it, repeat. Not financial advice.
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My name is Rob and I am a college student doing my best to get involved in the crypto world. I have enjoyed blogging thus far and thank you for reading my article! Give me a follow and let’s build the community together through consistent engagement!
