People are trying to figure out the best way to invest in cryptocurrency because it can be very unpredictable. If you're an investor looking to reduce your risk, you might consider a strategy called dollar-cost averaging (DCA). However, using this strategy means you're less likely to make really big profits.
No, that strategy doesn't mean you're less likely to make really big profits. Many people say this in hindsight knowing what the price of Bitcoin was over all those early days/years. But check out this example provided by
JayJuanGee:
Dollar-cost averaging means putting the same amount of money into an investment over time. It's nice because it makes investors feel more comfortable. By spreading out your Bitcoin purchases over time, you're either buying when it's doing well, or you're getting it at a lower price compared to your first purchase, which is a good thing.
That's correct and the only hurdle to consistent DCA purchases is to become inconsistent, to deviate from the plan for reasons. Some lose interest, some think it's not going fast enough and switch to a lump sum, some forget to do it on a regular basis or prefer to go on a short vacation for the money and skip the purchase. Some buy a new iPhone and also have no money for their DCA plan, etc.
Some people prefer to invest a large lump sum all at once because you might end up with more Bitcoin quickly. But there's also a chance you'll end up with less. To decide between these two methods, you need to think about the risk involved.
It's about preference and that preference should be in line with available resources, and the term "available" should be aligned with your financial baseline and what you have left over to spend on things that are so called investments, assets that are supposed to provide added value to your life in the future. Also, I don't really get why it is
either this method or that method? Why can't someone find a sweet spot by using a lump sum and DCAing with whatever distribution the person feels comfortable with?
If you want a bigger chance of making a lot of money, go for the lump sum. If you want to slowly accumulate Bitcoin with the least risk (even if it means having less Bitcoin in the end), then DCA is better. For most regular people who just want to accumulate Bitcoin, DCA is a good choice because it helps you get a decent amount of Bitcoin based on the money you have to invest.
What is your opinion?
Worst advice I have ever read (but no worries, you are not the first to give this advice, it can be found everywhere). Second part of the last quote is correct. Accumulation through DCAing is a good choice and usually never wrong if the investor gets the portion of their income right that is truly available for investments.
And and which method do you prefer to be used in this present market conditions?
A mix of both because, why not?