Investing isn’t as easy as it seems on the surface, especially when in comes to a highly volatile, high-risk, emerging asset like Bitcoin and other crypto assets. Much research and due diligence is required by the investor to ensure their investments are fundamentally sound, and their price charts display positive technical setups before taking a chance to buy Bitcoin.
Learning to trade, or time the market by buying high and selling low, is often a zero sum game for any inexperienced investors, crypto markets or otherwise. Instead, price action in Bitcoin price charts over the last year shows that simply setting up a recurring buy and dollar-cost averaging into cryptocurrencies is by far a less risky strategy for most novice crypto investors looking to buy Bitcoin for the first time.
Crypto Investors Should Consider DCA Investment Strategy To Buy Bitcoin
Volume profiles of the Bitcoin bear market “bottom” shows that crypto investors eyeballing the lowest prices the crypto asset saw in over a year were hesitant to pull the trigger, missing the best possible buying opportunity.
But buying at the bottom is extremely difficult, takes strong hands, nerves of steel, and years of experience in contrarian market trading. Equally as difficult is properly spotting a top. In hindsight, it’s easier, as the irrational exuberance can be cut with a knife, but it’s always harder to sell on the way up than it is on the way down.
Crypto investors – or any market trader – aim to buy these bottoms and sell tops to maximize profitability and return on investment. But even the most experienced traders could be forced to watch in dismay as the market moves in the opposite direction of their setup.
If you dollar cost averaged into $BTC every single day for the last year your average buy-in would be $5500 right now.
If you're bullish on something fundamentally sniping the bottom really isn't necessary. pic.twitter.com/8XSsB4ipF4
— DonAlt (@CryptoDonAlt) June 5, 2019
A much more effective solution, according to one crypto analyst’s analysis of Bitcoin price action over the last year. The research concludes that if an investor had bought into Bitcoin one time per day – dollar-cost averaging – for the last 365 days, would have resulted in an average buy of roughly $5,500.
Related Reading | Only 3 Months Exist Where Buying Bitcoin Resulted in Losses
Such an average buy in would have nearly doubled the investor’s return at the recent local high of $9100. The average buy-in number takes into account two peaks at $9,000 and $8,000 prior to the break of support at $6,000, as well as the lows set around $3,000.
Yes, the average buy in is over $2,000 above the bear market bottom, however, the number also reached almost $4,000 over the average buy in at the local high, adding further credence that DCA is the best strategy for new investors seeking to minimize risk and take a less hands on approach.
Many crypto exchanges and wallet apps now offer ways to set up recurring buys, effectively allowing investors to dollar-cost average into assets without a second thought.
The idea is that with Bitcoin potentially able to reach prices of $100,000 to even millions per BTC, missing a bottom by a couple thousand dollars isn’t going to make a major difference, and that consistently buying before prices take off further is the wisest choice.