Key Benefits of Dollar-Cost Averaging (DCA) for Bitcoin
- DCA allows investors to get the best average price on Bitcoin over a long period of time.
- It saves time and removes the need for individuals to become professional traders.
- DCA can alleviate the fear of missing out, a common emotion that can lead to impulsive or emotional trading decisions.
How Does DCA Work for Bitcoin?
Dollar-cost averaging is an automated trading strategy that involves investing a fixed amount of money in Bitcoin at regular intervals, regardless of the current price. By buying a little bit each day or week, investors can potentially get the best average price on Bitcoin and avoid the stress and time involved in trying to time the market. In fact, according to dcaBitcoin.com, investing $10 in Bitcoin every day for the past four years would have resulted in over $61,000 worth of Bitcoin, despite the market’s ups and downs.
The Benefits of Letting Traders Trade
If you’re not a professional trader, it’s probably best to avoid trying to trade professionally. As noted in Morgan Housel’s book “The Psychology of Money,” individuals who are not traders often end up losing time and money by attempting to trade. A better option is to put your trades on autopilot and focus on your career and personal life.
Managing the Fear of Missing Out
The fear of missing out (FOMO) is a common emotion that can lead to impulsive or emotional trading decisions. To avoid letting FOMO ruin your investment strategy, consider adopting the DCA approach. By consistently investing a fixed amount of money in Bitcoin every day, you can satisfy your desire to participate in the market without going all in and potentially making costly mistakes. This can also help you maintain a healthy level of liquidity in your exchange account, allowing you to take advantage of dips in the market without depleting all of your available funds.
A Forward-Thinking Approach to DCA
Dollar-cost averaging works best as a long-term investment strategy. As long as the general direction of Bitcoin is upward, time will smooth out the short-term losses and allow the strategy to work in your favor. By setting up an automated system to invest in Bitcoin every day, you can enjoy your free time and focus on your career stress-free, while still participating in the market.