We’ve written elsewhere about Cost Averaging in our section on how to earn crypto. Cost Averaging – sometimes called Dollar Cost Averaging – simply refers to making equally sized, regularly recurring trades, instead of one lump sum.
The attraction of cost averaging is that it can help mitigate concerns around volatility and choosing an entry point. Regular trades over time will smooth the ups and downs.
You do of course need to do the Fundamental Analysis to make a judgement about the long term viability of your chosen cryptocurrency, but thereafter your investment path is neatly mapped out.
Cost Averaging works best when pursued over a long enough period of time to benefit from both a down cycle and an up cycle.
DCA is not risk free, during down cycles you will see the value of your investment decline, potentially below your original investment, with no certainty it will recover.
There is no guarantee future price movement will reflect historic, so you still need to do the Fundamental Analysis to establish that you are prepared to take the associated risk with the conviction to pursue regular purchases, seeing your investment declining over an extended period, known as a bear market.
Create a spreadsheet planning your investments out, then filling in the details of each regular purchase. You might want to include these fields:
- Date
- Investment Detail
- Amount investment (€)
- Cumulative Amount Invested (€)
- Purchase Price (€)
- Crypto Value
- Crypto Cumulative Value
- Portfolio Value (€)
- P&L
Leave a Reply