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How Dollar-Cost Averaging Works for Crypto InvestingĮxperts agree that dollar-cost averaging is a safer method of crypto investing than lump sum buying and selling. If the price of your investment drops during the time you are dollar-cost averaging, then you stand to make a profit if the price moves back up.įor many people, dollar-cost averaging is the most realistic and accessible way to ensure that they’re getting into the market with a reduced level of risk, especially if they have a longer-term time horizon. With dollar-cost averaging, you’re setting recurring buys at regular intervals for a fixed dollar amount, and you’re buying both the highs and lows. But you can break those contributions down even further to be weekly or daily. For example, if your yearly goal is to invest $1,500 into Bitcoin, you would contribute around $125 a month throughout the year. The strategy involves dividing up your total investment into small increments and investing them in the market regularly. That’s where dollar-costing averaging can come into play as it helps you focus on the benefits over time rather than the ups and downs of a day or week. What Is Dollar-Cost Averaging?įor a long-term investor, a slow and steady approach is the way to go. If you’re a crypto investor, here’s what you need to know about dollar-costing averaging and how you can apply it to your crypto strategy. In general, experts recommend keeping your cryptocurrency investments to under 5% of your portfolio, and prioritizing more pressing aspects of your financial life, such as saving for an emergency, contributing to a retirement account, and paying off high-interest debt. You should still diversify your wealth in case your decisions are not correct.” “Just don’t put all your eggs in one basket. “It’s a great strategy, and it should be applied to something that you believe in,” says Daniel Polotsky, founder of Bitcoin ATM and financial services firm CoinFlip. Traditionally, investors have applied the strategy to stocks, but experts say you can also apply it to crypto investments. We’re talking about dollar-cost averaging - a classic investing strategy in which you make regular, smaller investments throughout the year instead of all at once. But there’s an old strategy for these new investments that can take your mind off the ups and downs. For more information, see How We Make Money.įor cryptocurrency investors, volatility is a fact of life. Some links on this page - clearly marked - may take you to a partner website and may result in us earning a referral commission. We want to help you make more informed decisions.