As the price of Bitcoin (BTC) surges upwards, many retail investors may think it’s too late to arrive at this party, but Jordan Finneseth at Cointelegraph says there is at least one way to buy effectively in this bull cycle.
You can always tell when there is a buzz around BTC, because the mainstream media suddenly starts publishing stories about it: the rest of the time it simply ignores the entire cryptocurrency and blockchain sector. Whilst some big names in crypto may tweet about the fortunes they have made, this is not the average experience with Bitcoin investing, yet that doesn’t mean there is no money to be made. With low bank interest rates, you may be better putting some of your savings into the major cryptocurrencies, because even with its known volatility, you are most likely to get a bigger return.
A buying solution for the risk averse
So, if you are a retail investor who has a full-time job, and no time to get into day trading in crypto, there is a way to buy, and according to Finneseth it is called “dollar-cost averaging.”
Finneseth says: “For the average investor who is looking for a more simplified approach, multiple studies have shown that dollar-cost averaging Bitcoin purchases has provided a return on investment that most funds would boast about.”
For example, someone who put $1,000 into BTC in 2017, would over the three years until now, enjoyed an increase in their portfolio value far above all the traditional investment markets. This is a ‘buy and hold’ strategy that works, however, not everyone is comfortable with leaving a chunk of money in an exchange for long periods of time. So, the dollar-cost averaging system works for those who are risk averse.
Warren Buffett approves the method
This method is one recommended by Warren Buffet when investing in volatile markets. How does it work? Instead of throwing all your savings pot into crypto buying at one go, you divide it up into smaller amounts and invest periodically, over time. Finneseth says, “The idea being that while it can be difficult to time a market top or bottom, making regular purchases provides the best average entry price.”
He gives us an example: “Using the Bitcoin DCA tool, an investor can see that $100 invested weekly into BTC since the Dec. 2017 all-time high would currently be sitting on a portfolio worth $40,867 at the current Bitcoin value.” That’s a gain of 160% over three years.
And that is why it is not too late to buy BTC. By buying small amounts weekly, you can still make impressive gains. You may not be in the position to buy a Lambo, but you’ll get a bigger return than if you put the same amount into a bank savings account.