Dollar Cost Averaging in crypto trading.

Investing in cryptocurrency involves a lot of risk. One of the best ways to reduce the risk is by using dollar cost averaging. 

What is Dollar Cost Averaging? 

Dollar Cost Averaging is the spreading of your investment over a period of time at a fixed rate. 

In cryptocurrency, DCA is the buying of a particular cryptocurrency with a fixed amount over a particular period of time. 

For instance, you want to invest in cryptocurrency with $1000.

Rather than buying the cryptocurrency at once, you decide to buy $100 worth of the coin every week. 

You are buying the same cryptocurrency at different prices over a period of time. 

A good example is Microstrategy, an investment management firm. 

The firm has been buying bitcoin at a regular interval regardless of the price. 

They are now holding more than 20,000 bitcoin at an average price of $21,000 per bitcoin. 

Their last purchase was when bitcoin was $57,000 but regardless they are still in profit. 

Factors to be considered before you use Dollar Cost averaging 

  • Know the difference between trading and investing. 

There is a thin line that demarcates trading from investing and that is the time frame. 

Trading is usually for a short period of time which can be within minutes, hours, days, and in rare cases weeks. 

Investing on the other hand has to do with years but sometimes can be for weeks and months. 

When you are investing, you are thinking about the future gain and not the immediate gain. 

  • Do Your Own Research

Dollar Cost Averaging also involves risks so there is a need to do your own research. 

Understanding the viability of the coin you want to buy is very important. 

Using DCA and buying a non-viable coin might lead to loss of money though the loss will be minimized. 

  • How much can you afford to lose? 

This is the last question after you have decided whether you are trading for the short term or investing. 

If you are investing, doing your own research will help you decide on the coin you want to buy. 

Then, how much can you afford to lose? 

The amount you can afford to lose is different from how much you can invest so think deeply about your capability before using DCA. 

Criteria to using Dollar Cost Averaging

  • Source of income 

If you did not have any source of income, preferably a stable one, don’t think about DCA. 

Since you are going to be buying a particular coin at intervals, there is a need to have a source of income. 

Kurepay offers a passive source of income which can be of great advantage. 

  • Discipline

WITHOUT discipline, it might be hard to keep up with the buying decision. 

Your ability to profit from dollar cost averaging lies with your commitment to buy as and when due. 

  • Understanding 

This is still coming up in another form. 

It entails having a good understanding of what you are venturing into. 

Don’t just buy because others are buying. 

When can I withdraw from DCA? 

  • Planned time frame

If your aim is to buy a coin every week for 10weeks, at the end of the 10th week, you can decide to sell. 

  • Massive returns

You can withdraw from your DCA if there is massive return before your stipulated time. 

You can still keep up with your plan it incase of massive return, withdraw the excess. 

  • Change in fundamental analysis 

If you notice anything bad about the cryptocurrency you are buying using DCA, don’t hesitate to pull out. 

This does not mean selling because the price is low. 

You are selling because you did not see any future again in the cryptocurrency. 

Using dollar cost averaging requires a wallet where you can easily buy, sell and swap. 

It requires a wallet where you can track your purchases over time so as to know the dollar cost average. 

Kurepay wallet is a perfect wallet for dollar cost averaging as it provides easy access to buy, sell, swap and keep record of your purchases. 

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