Bitcoin has experienced tremendous changes within a few months, going beyond the $60,000 mark in March before crumbling down to about $30,000 in less than 3 months.
This volatility (which was caused by Elon Musk’s tweet and the FBI’s raid on Russian hackers) has made the value of the cryptocurrency fall.
<< Read: Want To Invest? Go The Bitcoin Way >>
Despite the coin’s volatility, some investors are still building their holdings. One of such investors is Adam Traidman (the CEO and co-founder of BRD- a cryptocurrency wallet that has over 7 million users). Traidman does not time the market because he is used to the massive price swings of Bitcoin. Instead, he uses a conventional style of investment, i.e. the dollar-cost averaging.
To benefit from dollar-cost averaging, you need to invest a fixed amount regularly instead of buying a huge amount of the coin at once. With this, investors won’t have to time the market. It also gets rid of emotion from investing.
Investors using this model of investment (like Traidman) buy a little amount of Bitcoin every few days, irrespective of the price of Bitcoin at the time. According to Traidman, this helps him avoid the psychological stress associated with buying Bitcoin at $60,000, only to discover that his investment has lost 20% of its value within a day.
While chatting with CNBC Make It, Traidman said, “Casual investors tend to buy into the hype cycle and sell when the losses become a reality.” According to him, “It’s crazy, illogical thinking, but it happens all the time. Why would people buy high and sell low? Well, they don’t want to, but they sell out of fear.”
Although the model of dollar-cost averaging is employed in traditional forms of investments (such as index funds and stocks), it can be applied to cryptocurrency as well. Bitcoin has experienced many massive price changes throughout its over 10-year lifespan.
Traidman says “Before this run-up, we were looking at bitcoin prices that were at $8,000, $9,000, $10,000. Now we’re upset when it’s three times higher than that.”
However, Traidman pointed out that investing in alternative investments (such as Bitcoin) can be likened to professional gambling. Hence, people should only invest the money they are willing to lose.
People should see Bitcoin as a long-term investment, and not a get-rich-quick scheme. Newbies should not be bothered by the drops in prices because they will return as time goes on.
Tradiman converts a portion of his income to Bitcoin, irrespective of the price of Bitcoin at that time, and he is not worried about whether he is buying at the top of the market or the bottom.
According to Traidman, “dollar-cost averaging ends up making sense in the long term. If you contribute a little bit every time, in the long term you end up with a pretty darn good return if you can weather all the ups and downs.”
We think this is a form of investment that crypto enthusiasts should check out. what do you think?