Dollar-cost averaging is the amount of money you decide to invest in a certain frequency. For example, you can decide that once a week you will invest $100 in Bitcoin, whatever the price of Bitcoin. Dollar-cost averaging is a powerful strategy that can deliver you the best results and save you a lot of money.
Dollar-Cost averaging in a Bear Market. How?
Dollar-Cost averaging is a strategy that will lower the volatility by diversifying your buying’s over time so that you don’t buy at a high point. If done correctly it can seriously help your portfolio. In a bear market, the benefits of doing this are even higher.
If you want to invest in crypto it is crucial to decide how much money you want to invest, in which crypto you will invest, in how many projects you will invest in, and at what frequency you want to invest in the long term. When we talk about the long term we think for a couple of years.
How much money to invest?
The first thing you need to do is to decide the amount of money you want to invest. An unwritten rule is that you should invest 10% of your annual salary. Also, it is important to diversify your portfolio, not just to invest in crypto, but also not spread yourself into too many projects.
The key when we talk about building our wealth is our income. The income is something we depend on when it comes to living and investing. During a bear market, you should put your focus on increasing your income and increasing your income streams.
In how many projects to invest?
After you decide how much money you want and you can invest, the next thing is deciding how many projects you want to invest in. To have a diversified portfolio is a great idea, but when it comes to crypto is relatively easy to over diversify.
Depending on your budget you should decide on how many projects you will invest in. For example, if you have a budget of $500 a nice idea would be to invest in only two projects. If you have a budget of $1000 you can invest in four projects. The more money you have, the more projects you can invest in.
When investing in crypto you should focus on investing in the top 50 cryptocurrencies by market cap. You can invest 20% of your budget in some others, but the main thing is to stick with the top 50. These cryptocurrencies have a low risk and a high reward when switching from a bear cycle to a bull cycle.
What frequency to invest?
In this phase, you already know how much money you want to invest and in which projects you are going to invest. So, the next thing is to figure out the frequency you need to invest.
The frequency can be daily, weekly, bi-weekly, or monthly. The higher the frequency is you will be less exposed to volatility. On the other side the higher the frequency can lead to more fees depending on the exchange.
Five exchanges will allow you automatically recurring buying. By setting this you have the opportunity to focus your mind on something else, like increasing your income and building your wealth.
Bear markets are great for creating accounts with multiple exchanges. That way you have more options when the bull market comes back again. Some of the best exchanges with an auto Dollar-Cost average strategy to use are Coinbase, Binance, Crypto.com, Gemini, and FTX.
Dollar-Cost average is a great strategy to implement. It doesn’t require too much of your time and it can help you increase your wealth. All you need to do is pick some of the apps we mentioned above and start your own DCA strategy.
This investment technique is especially helpful in a down market and can help you to take advantage when the market bounces back. Investing is not easy but the take-away is to don’t stop investing in a bear market, because in the long term these purchases will have higher returns.
Also read: How to Invest in ETFs in 2022