The best way to execute a long-term investment strategy is to turn dollar cost averaging (DCA) into an asset. bitcoin (btc 3.05%) is no exception.
For most people, buying a little each day or each week will yield greater profits than trying to time the market. By shopping every day, you get the best prices, the worst prices, and everything in between. Implementing a bitcoin dca strategy serves three purposes: to get the best average price in bitcoin, to save time, and to alleviate the fear of missing out.
Reading: Dollar cost averaging bitcoin
the best average price
If someone bought $10 worth of bitcoin every day for the last four years in a row, they would have spent $14,610. according to dcabitcoin.com, those dollars would have bought around $61,000 worth of bitcoins. now someone could have bought the March 2020 dip, or the April 2021 dip, and come out with higher profits. however, few traders have the foresight to predict such market events and the skills to execute the trades. By dollar cost averaging, you are letting statistics be your professional trader. By getting the best average price, you are freeing yourself from the need to read and learn about trading. In short, you’re saving a lot of time.
let the traders trade
If you’re not a trader, then you probably shouldn’t trade. This is a lesson I learned from Morgan Housel’s book, The Psychology of Money. within it, he explains that people who are not traders will end up wasting time and money trying to trade. this is the exact opposite of the result someone who is investing wants to achieve. but it is possible to derail this result with just a few bad operations. The best option is to put your operations on autopilot and focus on your career and life. I have recognized that I am not a great trader and that is because I let my emotions get the better of me. One emotion in particular has caused me quite a few problems: the fear of missing out.
the fear of missing out
For me, the fear of missing out is rooted in greed. I see prices going up and I don’t want to be left behind. On the contrary, I see prices falling and I see a lot of good deals that I want to capitalize on. my problem is that I have a tendency to go with everything. so when I go all in on the dip, the dip tends to keep falling. this leaves me with no liquid cash to buy the dip dip.
Instead of trying to change my emotions, I have decided to bargain with my psyche. I buy $10 worth of bitcoins every day, so my mind is happy that I went to bed with more bitcoins than I woke up with. From a budget perspective, I know I need at least $300 in my trading account at the beginning of the month. this also prevents me from going all out because I know I’m getting the best average price. Since I’m not going all out, I have a little more cash on hand for when those dips hit. my strategy has been not to change my psyche, but to use my fear of missing out to my advantage by adopting the strategy that works best with him.
a forward-looking approach
dca strategy works well together with a forward-looking approach. the longer the time horizon, the better this strategy will work. as long as bitcoin’s general direction is up, time will smooth out short-term losses. I’m not worried about 40% drops in bitcoin because ultimately it’s an opportunity to get a better price. I can let my bot that buys bitcoin automatically every day do all the work, while I enjoy my free time and advance my career without stress.