There is plenty of reason why the Dollar Cost Averaging Strategy(DCA) might not be what you would typically think of when it comes to investing in cryptocurrencies. But if you were to find out how many Millennials actually use this strategy, then the numbers become a lot more understandable!
What Is The Dollar Cost Averaging Strategy?
The dollar cost averaging strategy is a technique that is typically used by investors when they are unsure about whether or not they should invest in an asset. The strategy involves investing a fixed amount of money, regardless of the price of the asset, over a period of time.
This helps to reduce the risk associated with a particular investment and allows for more accurate forecasting of future returns. One reason that millennials are using the DCA strategy when it comes to investing in cryptocurrencies is that the value of these assets remains largely unpredictable.
For example, if you choose to purchase 25 Ethereum, you may experience a gain or loss in value based on how quickly the market moves. By investing a smaller amount of money over time, you can reduce your overall risk while still enjoying potential rewards.
There are also some risks associated with investing in digital currencies.
For example, if you lose your investment in Bitcoin because of a hack or a poor decision, you may not be able to recover your funds. Dollar cost averaging allows you to spread out this risk by investing over time rather than all at once.
Pros Of Investing In Crypto Using This Strategy
The goal is to buy a fixed amount of cryptocurrency at a pre-set interval over a period of time, usually months or years. This reduces the risk associated with buying crypto and allows for more patient and gradual gains.
1. Patient and gradual gains – With the strategy, investors can expect slower but steadier returns over time. Instead of jumping from one investment to the next with little thought, following a dollar cost averaging plan allows for more time for your money to grow.
2. Reduced risk – By buying a fixed amount of cryptocurrency at set intervals, you take on less risk overall. This means that if the market takes a downturn, you still have some piece of the pie left and you can take advantage of lower prices by accumulating more coins.
Conversely, if the market goes up significantly, you’ve made some decent gains without putting all your eggs in one basket.
3. Minimal effort – One downside to many cryptocurrency investments is that they require a great deal of personal effort to keep track of prices and make necessary updates and changes in the fundamentals behind each project. With dollar cost averaging, you don’t have to do any extra legwork – your investments take care of themselves by buying at a set time every week or every month.
The true trick is to buy quality and aim for the long run. This way you can sleep well at night knowing that your portfolio will survive bad weather.
The opposite of a structured investment approach such as the DCA strategy is crypto day trading, which is far riskier. The unpredictable nature of volatile digital currencies and leveraged contracts through margin exchanges is the recipe for a quick disaster and a sure way to stay penniless in the future to come.
How To Set Up The Dollar Cost Averaging Strategy Yourself
Setting up a DCA strategy yourself is easier than you would think. All you need t get started is:
2. Your initial investment – You need to decide for yourself how much you are going to invest in your system and keep in mind that you need to deposit funds for the weekly or monthly purchases that will occur coming up.
3. Start the DCA system – When you are all set up it’s time to start the “money-making” machine. Follow the instructions given on the exchange and remember to carefully select the criteria for how much the system should buy and also how frequently.
From here you just need to overlook your finances and check in once in a while to see that the funds are being invested as they should. Remember to not stay glued to the P&L stats since this is a long-term investment strategy.
Also, if you come over extra funds during the time of your investment, feel free to add more capital and instruct the DCA system to make a larger purchase each week or month. Even the smallest increase in buying power will make a huge difference at the end of the investment process.
Millennials are mostly investing in crypto using the dollar cost averaging strategy. This is evidenced by the fact that they are more likely to invest a fixed amount of money into a particular investment, regardless of whether that investment goes up or down over time.
By investing predictably and gradually, millennials are hoping to minimize their risk while maximizing their return on investment when Bitcoin takes off along with the whole altcoin market.
Be a smart investor and emulate this brand new way of thinking that millennials have welcomed with their arms open. Only time will tell how successful you will be with your choice of investment but one thing is for sure, the DCA system will not budge as long as you keep it running.