Reduced risk of buying the top – One of the big benefits of DCA is it removes the pressure and uncertainty of when to invest a lump sum, and the fear of buying at the top of the market.
Crypto has proven to be a great long term investment, but is extremely volatile, so a DCA approach can average out the peaks and troughs.
No need for a lump sum – Many people look at the price of Bitcoin and mistakenly think you have to buy a whole coin. Our blog discussed this misconception, known as unit bias, but in short you can buy fractions of a Bitcoin (or other cryptocurrency). DCA essentially structures small purchases over regular intervals and is great for those that don’t have access to a lump sum.
Less stressful – There is no getting away from the fact that cryptocurrencies are extremely volatile. So even if you have done your research and think that the long term prospects for adoption and increase in value are good, you are still likely to experience periods of doubt and stress when the price – and your investment – are declining.
By spreading investment over time, and using an automated buying option, you can put this to the back of your mind. Risk doesn’t disappear, but it isn’t anywhere near as intense or consuming.
Time to learn – Cost averaging is a gradual process of giving you investment exposure to cryptocurrency. You might look at it as taking the slow and steady tortoise like approach, rather than the full-throttle more risky hare-like trading option.
Slow and steady gives the opportunity to learn as your stack slowly grows, and over time as the volatility evens out, you may gain the confidence to consider more advanced strategies for investing.
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