Dollar Cost Averaging Method:
This strategy is best for beginners to the investing world because you don’t need to worry about entering the market at the right time. You don’t have to stress yourself waiting for the price of bitcoin to go down; rather, you just buy at regular time intervals to spread the risk and hold/store your bitcoins in a cold, secure wallet (like a paper wallet or hardware wallet). For example, if you have an extra $100 to spare every week, you can buy bitcoins every week. Some weeks your $100 may buy you more bitcoin, and some weeks the same amount will buy you less. This method gives you peace of mind because you don’t need to worry about the dips in bitcoin price. You just have to be disciplined enough to follow your regular schedule and buy when you need to buy without looking at the bitcoin price charts. You don’t wait for the price to go down just because you see a downward trend on the charts, you just go right out and buy your bitcoins. With the dollar cost averaging method, your profits will also average out when you decide to sell your bitcoins. It might not come anywhere close to profits if you invested using the lump sum method, but if you sell at the right time (when the price is high), you’ll still make a healthy profit from your investment.
Lump Sum Investing Method:
The lump sum method is a much riskier method of investing bitcoins because you will be buying your bitcoins at a single price point. If you have $100,000 to invest, you will, of course, want to buy the most Number of bitcoins, so you wait for the price to go down. To maximize your investment, you will be compelled to wait for the possible lowest price before buying your bitcoins. This method means you will have to ‘time’ the market, so you buy at just the right time. Of course, this is easier said than done with a volatile commodity like bitcoin. The price varies so much it’s extremely difficult to predict when the next price dip is so you can buy at that price. Trying to time the market can cause a lot of headache and stress to an inexperienced investor. It just brings too many ‘what ifs’ to mind, such as: ‘What if I just wait a few more hours, the price may go down, and I’d be able to buy more bitcoins then.’ Or ‘What if the price never goes down to the price I want to buy bitcoins at, I’ll never be able to buy bitcoins.’When it comes to selling off your lump sum investment in the future, you may find it hard to sell as well because you’ll be waiting to sell at the right time so you can make the most profit. You’ll try to predict the highest price point, and you’ll berate yourself if you sold too soon and lose out on the possibility of much greater profit. The good thing with lump sum investment method though is if you manage to buy at the lowest possible price and sell at the highest possible price, then you’ll make a much bigger profit than if you invested bitcoins using the dollar cost averaging method.
Crypto Hedge Fund Investing Method:
If you don’t want to trouble yourself with learning the basics of investing using either the dollar cost averaging method or the lump sum method, you might be better off investing your money in a cryptocurrency hedge fund. However, this option is best suited for people who can afford to pay their hefty management and performance fees. The management fee is paid upfront; some funds require a 2% management fee so if you’re investing $100,000, $2,000 of that is going to the management fee which means only $98,000 will be invested in cryptocurrency. Also, your hedge fund manager will get a percentage of your profits. Some managers require a 20% performance fee so if you profit $50,000 from your investment, $10,000 of that is going to be paid as an incentive fee. The hedge fund method may not suit everyone, but if you look beyond the fees, you’re at least looking at a hands-off approach to investing which could prove to be very profitable for both you and your hedge fund manager.
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