There are a number of sound investment strategies a crypto investor may choose to gain exposure to Bitcoin and other cryptocurrencies, depending on important factors such as risk appetite or income level.
Those who jump into Bitcoin investing without a plan can result in significant losses. However, one of even the slowest, and safest methods of accumulating Bitcoin could soon leave investors at a loss if the first-ever cryptocurrency’s price falls any further.
Even Dollar Cost Averaging Bitcoin in 2019 Could Lead to Losses
For anyone considering investing in Bitcoin and other cryptocurrencies, among the first pieces of advice often given to those interested in entering the space, is to never invest more than you can comfortably afford to lose.
The advice is given for a number of reasons, including the fact that cryptocurrencies are like catnip for cybercriminals, or more commonly, the volatility associated with cryptocurrencies could result in a complete loss of one’s initial investment.
Those that bought into Bitcoin without an investment strategy at the height of the crypto hype bubble were stuck FOMOing into $20,000 BTC and have been holding the asset at a loss for nearly two years at this point if they haven’t already sold at a loss.
Oftentimes, for newer investors who don’t have experience with market cycles, technical analysis, or fundamental factors, should consider a more patient approach to investing called “dollar-cost averaging.”
The practice of dollar-cost averaging consists of making a set, regular investment in an asset at regularly scheduled intervals. This way, as the asset’s price rises and falls through natural market movements, the investor is always steadily buying the asset, and the actual buy-in price at that time becomes less relevant, and only factors into the average buy-in cost.
However, even crypto investors who have invested one dollar daily into Bitcoin over the last year may soon be at a loss if the first-ever cryptocurrency drops further in value.
At this rate,
— Mohit Sorout 📈 (@singhsoro) November 25, 2019
Dating back one year ago, investors would be buying up Bitcoin at lower than current prices, making their initial average buy-in price somewhere between $3,000 and $6,000. But after the April 2019 rally, Bitcoin price broke up above $6,000 and reached prices as high as $14,000.
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The crypto asset traded much of the second half of the year above $10,000 causing the daily buy-in average price to rise over time. And now that Bitcoin is falling back down towards $6,000, anyone who dollar cost averaged into the crypto asset could soon be left with a loss – even despite using what most consider to be the safest and most effective investment strategy possible.
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