In the past recent years, Cryptocurrencies has been the most unpredictable among all other currencies or traditional investments. The frequent change in price in Cryptocurrencies has led to chaos among investors. Average investors are not able to match their price with $400 million and the changes with Reddit Cryptocurrency forum. This increases the issue among the traders, but Coinbase has a solution to the problem with one traditional approach DCA (Dollar Cost Averaging) that is used in the traditional market of finance.
Coinbase stated in its recently posted blog post, “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.” DCA helps in to keep the track of the changes occurring in the market and its unpredictability through investing a constant amount on a regular schedule and thus DCA helps the traders to stay in the market together with all ups and downs occurring in the market.
To understand how DCA works, let us take an example of an investor who uses DCA to purchase the total amount of $100 Bitcoin in two weeks. Let us take the two cases:
- If market smashes, $100 will be obtaining more Bitcoin and it increases the potential for further gain in case market turns around.
- If the market turns around, $100 will be obtaining less Bitcoin which diminishes the loss that can again occur if bullish run comes back.
Coinbase has also given a reason to this breakthrough in its Blog, stating, “Cryptocurrencies like Bitcoin have experienced price volatility in the past, with values swinging double-digit percentage points in a single day — and sometimes even in a single hour, Whenever the price starts to move, there’s no shortage of FOMO around whether it’s the right time to buy or not. As with any kind of investment, this can cause a lot of anxiety, uncertainty, or fear to participate at all.”
DCA can help the investors to see and seek the opportunity in the unpredictability among Cryptocurrency market through frequent purchases, in which Coinbase has its faith. So to conclude our discussion we can say that, buy Cryptocurrency slowly over time and then just wait and watch what might happen.