Veteran bitcoin (BTC) investors know that the cryptocurrency market trades in cycles, and now that the price of BTC has crossed its constant high, a full bull cycle begins.
As this new cycle picks up steam, the regular media is abuzz with articles about Bitcoin, and it seems that everyone, from the world famous investment guru to Uber drivers, has an opinion on the best tips, tricks, and coins to buy to make instant cash. states. …
Like the recent bull market, it will be full of messages from celebrities on crypto Twitter who have somehow managed to make $ 100 to $ 10,000 or more, but this is not necessarily the experience of most cryptocurrency investors who often find themselves vulnerable to the whims of whales. … Cryptocurrencies and price swings on exchanges offering cryptocurrency derivatives.
For the average investor who has a limited time and works full time, day trading is not suitable. Add to that the fact that the data shows that most high frequency traders cannot make big bucks.
While some have time to research legitimate crypto projects and do some basic and technical analysis, this in itself can quickly turn into a full-time job.
Fortunately, there is an easier and more efficient way to trade bitcoin during bullish and bearish cycles, and this tactic is called the average dollar value.
The data shows that the average dollar value is the best for accumulating bitcoins.
For the average investor who wants a simpler approach, several studies have shown that the average dollar value of buying bitcoins yielded the return on investment that most funds boast.
As shown in the chart above, an investor who bought $ 1,000 in 2017 significantly increased the portfolio value and outperformed all traditional markets in 3 years.
This buy and hold strategy is a tried and true way to invest in bitcoin, but not all investors are comfortable investing huge amounts of money in an unstable asset like bitcoin.
For risk averse investors, the average dollar value is a “safer” way to invest in risk assets.
The Average Dollar Value (DCA) is a well-known investment method, described by big investors like Warren Buffett as a way of investing in volatile markets. While Oracle of Omaha specifically mentioned buying large index funds, the same can be said for cryptocurrencies.
Rather than taking a lump sum and investing all at once, the investor instead splits the larger amount into smaller amounts and then periodically invests smaller amounts over time. The idea is that while it can be difficult to find time above or below the market, regular purchases provide the best average entry price.
For example, with the Bitcoin DCA tool, an investor can see that $ 100 invested in BTC per week since peak time in December 2017 will currently be in a $ 40,867 portfolio at Bitcoin’s current value. As shown in the chart below, a total investment of $ 15,700 over $ 100 per week resulted in a 160% increase in value over three years.
DCA is used by large funds to facilitate access to new positions
Even large organizations are using this strategy to increase access to Bitcoin and Ether.
Microstrategy recently made a splash in the cryptocurrency and traditional investment world when CEO Michael Sailor announced that the company had bought over $ 425 million worth of bitcoin and made BTC its primary reserve currency.
Discussing the acquisition on Twitter, Sailor stated:
“ To get 16,796 BTC (revealed September 14, 20), we traded 74 hours continuously, making 88,617 trades ~ 0.19 BTC every 3 seconds. ~ $ 39,414 in BTC per minute, but at any given time, we were ready to buy $ 30-50 million in a matter of seconds, if we were lucky enough to hit a bearish peak of 1-2%.
Although this is an institutional example of a DCA as described by Sailor, the smaller trades were spread over time to achieve the best average price over the specified time period without causing a noticeable rally in the market.
Inertia and stability have been proven to win the race.
Day traders, investment experts, and celebrities using the Twitter cryptocurrency often post screenshots of their profit and loss trades, forcing any investor who wants to ditch bitcoin, but this has proven to be not the most efficient method.
The data reflects grim statistics for day traders, as 80% to 95% of day traders actually lose their money. This is an indicator not only for cryptocurrency markets, but for all trading markets.
So the next time you see a flashy advertisement or email newsletter that guarantees big payouts and selects proven cryptocurrencies that are sure to be the next lunar coin at a low price of $ 1,000 per month.