In this article, we’ll explore some key considerations to help you make informed decisions on your journey to building a Bitcoin portfolio.
Understanding Bitcoin’s Volatility:
Bitcoin is known for its price volatility, and market fluctuations can be significant. While this volatility presents profit opportunities, it also carries risks. Timing your Bitcoin purchases can be challenging, as prices are influenced by various factors, including market demand, regulatory developments, and macroeconomic trends. It is extremely difficult to time the market hence we recommend the DCA (Dollar Cost Averaging) approach. More light on this soon.
Long-Term vs. Short-Term Approach:The decision to buy and save in Bitcoin often hinges on your investment goals. If you’re adopting a long-term investment strategy, timing may be less critical. Bitcoin’s historical performance has shown an upward trajectory over extended periods, suggesting that holding onto your investment for the long haul could yield positive returns. On the other hand, if you’re looking for short-term gains, staying informed about market trends and timing your purchases during potential dips may be more relevant. Irrespective of what your goals are, the ideal approach to a futuristic financial goal is to plan for it and one effective way to achieve that is by saving.
What is Dollar Cost Averaging Bitcoin?
Bitcoin dollar cost averaging consists in investing a fixed amount of USD, into BTC, on regular time intervals.
Purchasing $10 every week, for example, would be dollar cost averaging.
It’s January 1st, 2018, and John decides to purchase $5,000 worth of Bitcoin today.
The Bitcoin price at the time was $13,800 per coin, which means that John now owns 0.362 BTC.
Investing in Bitcoin using DCA (Example)
It’s January 1st, 2018, and Alice decides she wants to purchase $5,000 worth of Bitcoin.
However, instead of investing the entire amount today, she decides to purchase $500 every month, for 10 months.
10 months later, Alice owns 0.61 BTC.
That’s allmost twice as much as John, even though both invested the same amount.
