A savings plan or dollar-cost averaging (DCA) is an investment strategy that regularly invests a fixed amount of money in a specific investment product, regardless of its current price. In this article, we'll look at why a bitcoin savings plan can be a good strategy.
1. Use Price Fluctuations to your Advantage
Bitcoin is known for its price volatility. The price of a bitcoin has fluctuated significantly in the past, making it difficult to predict the perfect time to buy or sell bitcoin. Applying a savings plan reduces the effect of volatility, as regular investments are made at both lower and higher prices. In the long term, this allows you to get started at an average price and reduces the risk of an adverse buying time.
2. Benefit from long-term Growth
Bitcoin has shown an impressive price increase in recent years. By investing regularly over a longer period of time, an investor can benefit from bitcoin's long-term growth potential. Since no one can predict the exact course of the bitcoin price, a savings plan offers the opportunity to gradually participate in the market and profit from a potential increase in the bitcoin price without having to time the market.
Attempting to time the market involves various risks: Market activity depends on many factors, including political events, regulations, and technological developments. These external influences are difficult to predict and can lead to unforeseen market movements. In addition, market timing requires continuous market monitoring, which takes a lot of time and attention.
Historically speaking, a long-term investment in bitcoin has generated high returns, which is why, in our opinion, it is advisable to pursue a long-term investment strategy.
Monthly investment in bitcoin of €500 over 5 years:
3. Reduce emotional Decisions
Emotions often play a negative role in investing. When the price of bitcoin rises, some investors tend to buy impulsively and possibly overinvest. On the other hand, when the price falls, anxiety and panic can lead to hasty sales.
A savings plan helps to reduce emotional impact, as investments are carried out independently of short-term price fluctuations. This promotes a disciplined and long-term approach. #HODL
4. Reduce Effort
With a savings plan, wealth can be built up with minimal effort.
In just a few steps, the desired amount and time of investment in bitcoin are determined. From this point on, everything runs automatically. Long monitoring or manual intervention is no longer necessary.
Now, as an investor, you can watch your bitcoin stack grow and focus on other important things in life.
5. Useful even with large Amounts
A savings plan is not only useful for smaller investments, but also for larger amounts. By dividing a large investment sum into regular tranches, the risk of a one-time investment can be reduced at an unfavorable moment.
Overall, a savings plan, or “dollar-cost averaging,” provides an effective strategy for investing in bitcoin. It helps to take advantage of volatility and long-term growth, minimize emotional decisions, lower the average purchase price and make automated investments. If you're interested in bitcoin and are ready to invest for the long term, a savings plan can be a good strategy.
