Coinbase, one of the most popular cryptocurrency exchanges, recently published a blog post on the “perfect” time to buy cryptocurrency. Of course, this isn’t a claim one can make wholeheartedly, as the market is consistently volatile, but instead, the platform is providing useful advice to keep in mind while investing.
Traditional methods applied to crypto trading
The process is through something called dollar-cost averaging (DCA). As defined in the post, DCA is “an investment technique that aims to reduce the impact of market volatility by investing a set amount on a regular schedule (for example, purchasing $100 of bitcoin every two weeks). And it’s not unique to crypto — traditional investors have been using DCA for decades to weather stock market volatility.”
Essentially, by setting a timeframe to consistently buy into – the blog post gives an example of every two weeks – you’re not worrying about price. Instead, you’re simply buying:
“When the market is down, that $100 will purchase more bitcoin, increasing the potential for a greater gain if the market turns around. When the market is up, that $100 will purchase less bitcoin, reducing risk of loss if the market turns the other way.”
This method is a part of traditional investing as well, but applying it to crypto just makes life here a little easier. “DCA can be an effective way to own crypto without the anxiety of committing a significant amount of capital at a fixed price at a particular moment in time,” continues the post. “Not to mention, doing this provides the added benefit of adjusting this amount up or down as you go. Either way, if you’re considering using DCA, think first about whether DCA is right for you and your own investment circumstances. Again, please consult a licensed investment advisor if you’re unsure.”
Coinbase’s blog post then goes into recurring buys – a feature on the exchange that’s essentially the same thing as DCA. You simply have to pick an asset, choose how much you’d like to invest, and then specify a timeframe on either a weekly, daily, or monthly recurrence.
Please, remember that while this is good advice for subverting volatility, there is no guarantee that this or any other investment advice will work out. Trade with caution and never put in more money than you can afford to lose.