Dollar Cost Averaging into Bitcoin / Altcoins has been a common piece of advice in the comment sections. Today we’ll talk about whether or not you should dollar cost average into Bitcoin, how it is different from stocks, and why I don’t employ it all the time.
For those of you unfamilar, dollar cost averaging is where you take a sum of money (let’s say $10,000) and instead of investing it all in Bitcoin today (also known as “lump sum investing”), you split it out over a certain time frame. In this video, the example I use is 10 weeks. Therefore, you put in $1,000 at the exact same time every week no matter what Bitcoin’s price is. This smooths out volatility.
More importantly, it will force you to a set of rules and reduce your emotional response to price action in Bitcoin. If you lump sum invest and Bitcoin suddenly goes down, it is a painful spot to be in. However, it is worth noting lump sum investing is generally better for bull markets. Setting specific buy levels (rather than times to buy) is better for those who have higher conviction about the markets and are aware of the consequences of their decisions. That’s what I do on this channel for the most part.
However, when you are uncertain, dollar cost averaging is an excellent strategy and I have employed it myself just recently with altcoins prior to the Bitcoin 2X cancellation. In addition, if you feel FOMO or the effects of FUD, dollar cost averaging will be a better strategy for you. Feel free to let me know your thoughts!
If you like my content, you can support me through using ANY of the affiliate links below (I receive small compensation). The beauty of affiliate links is that I can pick and choose what I like rather than have companies approach me – everything I linked below (with the exception of Trezor since I like Ledger), I use myself frequently.
My Recommended Hardware Wallets:
If you want to store your cryptocurrencies safely, the best way is through a hardware wallet. Seriously – look it up and you’ll find plenty of information supporting this claim. There are alternatives such as paper wallets, but these are convenient and my choice for cold storage (offline):
I personally prefer the Ledger Nano S, but the Trezor is such a close second that it really doesn’t matter which one you go with. Ledger Blue is premium and convenient, but not necessary.
My Favorite Book for Investing in Crypto:
This book is, bar none, my favorite book for investing in cryptocurrencies. It doesn’t bog you down with technical jargon, but instead focuses on all the elements you should understand before you invest.
It’s a comprehensive book for both beginners and experts. Beginners will find information about major cryptocurrencies (not just Bitcoin) as well as details on historical market events (that you can draw on for future) and events to watch for moving into the future. Experts will find the chapters on valuation particularly useful. For those of you involved in traditional investing, this book is even more of a godsend as finance info is explored (correlations with other asset classes, ETFs, etc).
My Recommended Exchanges: Coinbase / GDAX / Bittrex
If you sign up to Coinbase using link above, you and I will both receive $10 each after you buy your first $100 of Bitcoin using Coinbase. Coinbase is much less intimidating for beginners. Once ready, move up to GDAX for cheaper or zero fees. For altcoins, I recommend Bittrex.
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None of what I provide in my videos is investment advice. Please do your own due diligence.
Seeking Alpha: https://seekingalpha.com/author/truth-investor/articles