Time for Dollar Cost Averaging
Dollar Cost Averaging is a very common term among investors and long-term traders. A bear market is the right time to do DCA but clever investors don't wait for the peak bear market to hit and they keep buying a coin whenever they have the opportunity. This way the coin would be bought both during the good times as well as bad times and the purchase would end up fruitful when the market is really good. A slight increase in the price would make a huge difference if the invested value is very high.
Some people might wonder how they can allocate funds to do DCA when the market is not rewarding them well. But the focus can be on some of the coins and there can be regular investments on those coins alone and the results during the bull market would be excellent. I personally have not tried DCA on other coins but I continue to purchase Hive whenever I get a chance and I'm happy with what my portfolio would look like during the bull market. If the price of Hive hits over 1 dollar, I would already have some great holdings.
Reducing the investment risk
When people invest a lot of money in something and if the value has gone down, DCA is the perfect strategy to average their investments to make sure they don't lose much during the bear market and also they get an opportunity to book more profits when the market heals back. There are also investments that become a huge risk if bought during the peak bull run. There can be cases where we may not be able to wait till the market heals back to that old value. For example, imagine the situation of people who bought Bitcoin when the price hit 60k dollars. The only solution for them is to do a DCA and wait for their average value to hit and book profits after that. Those who are in this game for the long term would already know that and they don't fear purchasing Bitcoin at 60k dollars.
DCA may not work for everyone. It works only for people who know when to exactly enter and when to exit. But on average it is a great scheme and most of the time when played wisely, it would always give a decent profit. But sometimes the waiting time can be huge.
Biggest challenge with DCA
The market is very tempting right now to do a DCA. But one of the biggest challenges to doing DCA right now is that we need stable coins or more money to invest. Some people might have already spent their stable reserves to do a DCA and would run out of money to do a continuous investment. This can work only for people who have enough additional resources with which they can keep doing DCA. There can be people who invest their real-world earnings into crypto. This can turn out to be a decent value.
Another biggest challenge is to understand when it is a good time to do the DCA and when it is not. Most likely when the market is very good, it is not the right time to do a DCA. Only when the market is completely red, it can be a good time to invest further and average out. But if the initial invested value is higher than the current market price anyways, DCA is definitely good.
If you like what I'm doing on Hive, you can vote me as a witness with the links below.
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