Bitcoin Seasoned (BTC) investors know that the crypto market is trading in cycles, and now that BTC’s price has surpassed its all-time high before, a full bull cycle is underway.
As this new cycle gathers steam, the mainstream media is all familiar with articles about Bitcoin and everyone from world-famous investment gurus to Uber drivers seems to have opinions on the tips, tricks and ‘ the best moon coins one should buy in order to generate instant wealth.
Similar to the last bull market, this one will also be packed with posts by crypto-Twitter celebrities who somehow managed to turn $ 100 into $ 10,000 or more, but not the experience of most cryptocurrency investors who are necessarily subject to this. cryptocurrency whales and the wild price swings seen on exchanges offering crypto derivatives.
For the average investor with a limited time and a full-time job, day trading is not an option. Add to this the fact that data shows that the majority of high frequency traders fail to generate significant profits.
While there are some who have the time to research legitimate crypto projects and conduct basic and technical analysis, this can quickly become a full-time job in itself.
Fortunately, there is a much easier and more effective way to trade Bitcoin during bull and bear cycles and this tactic is called the dollar cost average.
Data shows that the average dollar cost is best for accumulating Bitcoin
For the average investor looking for a simpler approach, multiple studies have shown that the average dollar cost for Bitcoin purchases has yielded an investment return that most funds would boast about.
As shown in the chart above, an investor who purchased $ 1,000 in 2017 has significantly increased its portfolio value and outperformed all traditional markets during the 3-year period.
This buy and hold strategy is a tried and true method for investing in Bitcoin but not all investors are comfortable putting a large amount of money into an asset as volatile as Bitcoin.
For more risk-averse investors, the average cost of a dollar is an even ‘safer’ method to invest in risk on assets.
Average dollar cost (DCA) is a well-known investment technique that investment giants like Warren Buffet have touched on as a way to invest in volatile markets. While “Oracle Omaha” refers specifically to buying large index funds, the same one carries over to crypto.
Instead of taking a lump sum of money and investing it all at once, an investor would divide the larger amount into smaller amounts and then invest those smaller amounts from time to time over time. The idea is that while the timing of a peak or the bottom of a market can be difficult, buying regularly provides the best average price of entry.
For example, using the Bitcoin DCA tool, an investor can see that since December 2017, $ 100 invested per week to BTC would always be high on a portfolio worth $ 40,867 at the current Bitcoin value. As shown in the chart below, a total investment of $ 15,700 over $ 100 a week resulted in a 160% increase in value in three years.
DCA is used by large funds to facilitate new jobs
Even large organizations are using this strategy to increase their exposure to Bitcoin and Ether.
Most recently, Microstrategy made waves in the crypto and traditional investment world when its CEO Michael Saylor announced that the company had bought more than $ 425 million worth of Bitcoin and made BTC a major reserve.
When discussing the acquisition on Twitter Saylor said:
“To acquire 16,796 BTCs (revealed 9/14/20), we traded 74 hours continuously, achieving 88,617 trades ~ 0.19 BTC every 3 seconds. ~ $ 39,414 at BTC per minute, but we were always ready to buy $ 30-50 million in a matter of seconds if we were lucky with a 1-2% downward spiral. ”
While this is clearly a foundational example of DCA, as Saylor described, smaller trades spread over time to get the best average price for the fixed period without causing a noticeable market drop.
It is proven that slow and steady wins the race
Day traders, investment pundits and crypto Twitter celebrities often post profit-and-loss screenshots of their trades that would make any investor want to FOMO into Bitcoin but this has proven to be the most effective method.
Data reflects serious statistics for day traders as 80% to 95% of day traders actually lose money. This figure is not just for cryptocurrency markets but with all trading markets as well.
So the next time you find that a flashy ad or email newsletter guarantees huge earnings and assured fire crypto collections that are guaranteed to be the next moon penny for the low price of $ 1,000 a month, remember that Another dollar cost is a more reliable method for accumulating smaller amounts of Bitcoin on a regular basis.
It may not be flashy and waste money, but it is a wise, prudent method of building long-term wealth.
The views and opinions expressed here are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.