How to invest in Bitcoin safely

By spash0768 | CryptoThought | 8 May 2021


We are currently in a bull market and there are a lot of excitement in cryptocurrency field. Bitcoin is up +600% in the last 12 months. Should you buy or sell? Will it rise even more or will it fall? Does that even matter?

The volatility of an asset can stress you out when having a skin in the game. A common method many investors use to balance risk/reward is Dollar Cost Averaging (DCA) - buying a certain asset on a regular basis (e.g. once a month). But can it save you if crypto turns bearish? Let's try to figure that out.

Imagine it's year 2017. You have just heard of that weird thing called Bitcoin, and you're not sure if you should invest in it. The year goes by and you see the price chart, Bitcoin hits all time high at 20 000 USD, and you FOMO.

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For demonstration purposes let's say you have 1000 USD in savings that you decide to invest in Bitcoin, and afterwards add 100 USD a month no matter what.

You buy your first Bitcoin as it turns out at the highest possible price - 20,089 USD a coin. And then it starts going down sharply. You freak out, but you have a plan and you stick to it. Unfortunately for you, as time goes by, things don't get better at all.

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How are you doing 1 year later? You have invested 2,200 USD and lost almost 1,400 USD (-63%!!!). The bear market is not working well for you. How does that make you feel? Do you still believe that investing in Bitcoin is a good idea?

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But you don't give up. During these months you have been educating yourself about Bitcoin, blockchain, scarcity, security etc. At this point you really believe that Bitcoin is going to be a future reserve asset and tool that can protect you from crazy FIAT money ''printing'' and inflation, so you keep sticking to a plan and continue to invest 100 USD a month. 

Finally things start getting better.

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After having losses for quite a while you finally break even after 18 months of consistent investing.

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From now on your persistence start to pay off. Bear market finally comes to an end, and a new Bull market is on the way.

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Fast forward to April of 2021. In last 40 months you have invested 5,000 USD, but your Bitcoin value is worth more than 33,000 USD!!! In little more than 3 years you have made 28,000 USD*, that's more than 5X your investment or +566%.

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Conclusion

  • Dollar Cost Averaging is a good long term buying strategy.
  • You need knowledge and faith in Bitcoin to avoid bad decisions, especially when price is tanking. Educate yourself!

 

If you are new to crypto, start your Bitcoin buying journey by earning 10 USD worth of free Bitcoin on Coinbase.com

Save 10% on trading fees on Binance.com

 

*Trading commissions were not taken into account in this calculation.

Disclaimer:

This is educational material. Nothing in this article can be considered investment advice or investment recommendation. There is a risk of losing money in the financial markets. Do your own research before making any financial and investment decisions.

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