When it comes to saving money whilst maximising profitability, most investors will strive to achieve exactly this in an effort to enhance their money-making potential. One particularly effective method of doing so is by implementing a dollar-cost averaging strategy. This has been especially beneficial when purchasing cryptocurrencies such as Bitcoin and in this post, we’ll be exploring the reasons behind why it can be such an effective solution.
What is Dollar-Cost Averaging
The easiest way to understand this term is by knowing what it does and how it works. Dollar-cost averaging is the practice of spreading out purchase payments, so that the fluctuating prices associated with assets such as crypto can be avoided, minimised, and in some cases – negated in their entirety especially when purchasing through sites such as https://paybis.com/.
Although the purchase process might take a little longer, assets can still be bought, and as the transactions will take place in a ‘median’ manner, the concerns associated with price increases can be reduced. For example, if a trader wanted to spend 6 months buying Bitcoin, they could do so on a similar date between January and June.
What is the Benefit of Doing This?
Bitcoin prices fluctuate. This is the same for a wide variety of other cryptocurrencies. If their cost is exceedingly high in January, it could drop by March or April. By implementing a dollar-cost averaging strategy, Bitcoin can still be obtained, and the price will always be ‘averaged’ out because consistent purchases are being made during the fluctuations.
This is one of the reasons why so many Bitcoin investors choose to strategically purchase their cryptocurrency. Although amateurs and beginners simply accept the price of this type of crypto whenever they decide to purchase – masters of the trade understand that waiting until the time is right can make all the difference to their profitability.
Can You Trade Without a Strategy?
Of course, in fact many traders do exactly this. Over time, however, most will begin to notice that there are far more efficient ways to enhance their profits, and one of them is with the dollar-cost averaging technique. The key is to know when the time is right to implement this strategy for maximum results.
Without careful planning and knowledge of expected fluctuations relating to the value of Bitcoin, a trader might find themselves experiencing frequent losses, and this defeats the purpose of trading in general. All investors will want to make money for their assets, and by using a dollar-cost technique, this can be done, but only when the time is right.
With dollar-cost averaging, a trader can invest the same amount of traditional currency into crypto, at regular intervals. They may not receive the same value of Bitcoin each month, but as they are spending the same, they can maintain a consistent flow of investment. When Bitcoin decreases in value, they receive more for less. And when it increases in value, they can re-sell the asset for a higher amount, therefore enhancing their profits.