When you begin investing in cryptocurrency, it is normal to feel somewhat unsure and ill at ease. It takes some time to get used to this. But one of the main things you should focus on to make your experience better is to acquire information. Tools and education are key factors to help you in managing your crypto assets.
One of the most helpful techniques is the DCA, which stands for Dollar Cost Averaging. Let us take a closer look what DCA is all about:
DCA is a popular technique, used by both experienced as well as beginners in crypto investments. This strategy allows one to hedge the market risk while still maintaining steady gains. It is obvious that one can never hope to time a volatile crypto market, but by applying the DCA one can turn that volatility into a positive aspect.
You will basically be investing the same amounts regularly. So, you get to buy more crypto whenever the dollar value is relatively low. Conversely, you will buy less when the value of the dollar is on the high side.
By maintaining this technique you will have your investment averaging itself out over a period of time. This is in a nutshell what the Dollar Cost Averaging is all about.
Coinbase allows you to put the Dollar Cost Averaging technique into practice in a simple and effortless manner. You can get started with recurring buys on Coinbase.
Coinbase pointed out that it favors this technique, and consequently it is a known fact that it is supporting investors who put the DCA into practice. Coinbase believes that by putting the market volatility factor to work in one’s favor, risks can be greatly reduced. There is practically never the perfect time to buy, and predictions in this regard are somewhat impossible. As such by implementing the DCA technique, one would be playing it quite safe.
One thing is for sure, – one cannot expect to get rich quickly with this method, but it does provide any investor a safe way to invest. This is because the DCA allows for short term market volatility to be neutralized.
Most cryptocurrencies, including Bitcoin, have experienced considerable price volatilities over the years. There were even days when values swung by double digit percentage points. Whenever this happens, there is going to be a great deal of predictions swung everywhere, and investors will end up trying to ascertain what might be the best course of action. This is when a lot of uncertainty complemented by anxiety and sometimes even fear end up clouding one’s judgement quite easily.
In order to avoid this, many investors are favoring the DCA method as it is a really effective way to own crypto currency without having the anxiety of such periods make things harder for them.
Coinbase offers investors a really interesting feature, named Recurring Buys. This is available on both the coinbase official website, as well as on the coinbase mobile apps. This Recurring Buys feature allows a user to invest in cryptocurrency in a paced manner. One can schedule his or her buys by choosing whether to make them daily, weekly or monthly.
You will be able to set your preferences on the recurring transactions page on. Here you can choose whether to buy or sell BTC, specify the account and the payout method. You then need to enter the desired amount, and specify how often you want this procedure to take place. You get to choose for how long you want this to happen, or else you may simply tick the ‘until I cancel’ option. So as you may see it is a really simple and quick way to put the DCA method into action.
Coinbase will automatically repeat this at the requested interval. You can modify your preferences at any time, and you may cancel it whenever you wish too. So it is really a flexible option.
It is important to note that even though one might try to make a mental note to apply the DCA method manually, it is not that simple. In most cases it is easy to simply be too busy with daily activities and end up forgetting. Many investors have a hard time being consistent, and so Coinbase is really offering a solution to this.
Ideally, you should decide on the level of risk tolerance and schedule you would like to try following. As a general rule of thumb beginners prefer to take on a low risk and establish a schedule of around 24 weeks. More experienced and savvy investors tend to choose a medium risk which is often around 16 weeks, or high risk level with a schedule of 8 weeks. This is a period where you will be investing all the money you are interested to invest and you should do this evenly.
With Coinbase you can set the recurring transaction to be carried out periodically. Most tend to choose the weekly option as it is the smoothest and most popular choice. Depending on the strategy period you decided upon, set a reminder so that you can cancel this manually at the end of the period. Based on how things went you can obviously revise your actions and start a new schedule so as to implement the most effective investment strategy possible. Thanks to Coinbase you can thus mitigate losses and capitalize on your growth in a planned but relatively safe manner.
And while you are doing so you will be putting any risks associated with emotions at bay. You will not be taking quick decisions because there have been considerable price movements. Rather you will be playing it safe while still doing relatively well. And for many investors this is the best way to proceed.
At the end of the day, it is better to be consistent and level headed rather than end up focusing too much on timing and attempting to make decisions quickly and generally, too enthusiastically.