HODL & DCA: Successful Crypto Strategy

With the likes of Bitcoin ($BTC), Shiba Inu ($SHIB), Ethereum ($ETH), Dogecoin ($DOGE) and other self proclaimed decentralized cryptocurrencies in the “ether” (no pun) as well as apps such as Coinbase & Coinbits (you know who been told) gaining attention and attracting new customers at alarming rates, the words “now what” come to mind fairly quickly once you make that illusive first crypto purchase. Or “when should I be buying” for the unsure individual.

Let’s look at the latter first, and provide my first tip:

“Your timing will always be off“

No matter when/where you “THINK” the best/worst price will be, you will be wrong. No one is perfect and the case for Dollar Cost Averaging (DCA) makes up for this beautifully.

“Investment in a security at regular intervals of a uniform sum regardless of the price level in order to obtain an overall reduction in cost per unit“
Merriam Webster’s Dollar Cost Averaging Definition

Dollar Cost Averaging Crypto

Websters accurately defines this term/strategy above. The crypto market is volatile and that is its double edged sword as well. DCA smooths this sometimes bumpy ride by keeping a consistent trend across the board for your investments in a “set it and forget it” type of mode. Taking a look at the picture above shows a great example why this strategy wins and illustrates the smooth path of averaging price vs. purchasing price and timing the market. In addition to this, apps such as the aforementioned Coinbase & Coinbits, make this extremely easy to the point that you can set a straight amount of $20 per week (or whatever frequency/amount you choose) to be withdrawn from your banking institution and into these apps for your crypto purchase. Cruise control…..and yes you can buy fractions of Bitcoin with as little as $20 (even littler).

This type of hands off approach has proved more profitable with the earnings outweighing the losses and the ability to capture the best price possible consistently. One of the main advantages is you get your time back. No more keeping the “hawk eye” on the charts (even though you may want to out of habit) or stressed because you couldn’t buy the dip. Dollar Cost Averaging is how I successfully built my portfolio from the ground up and anyone hopping onto the crypto train, I would advise wholeheartedly.

HODLing Crypto

This and HODLing. HODL is a acronym (pronounced ha-dull) and stands for:

HOLDING ON FOR DEAR LIFE

Simply put, this strategy is just that. Holding and not selling. Seems easy, right? Ehhhh……it can get tempting to sell at the low or even worse completely liquidating without any rhyme or reason but fueled by emotion from the volatility of the market. This is common and is literally “hustling backwards.”

HODLing works best when you not only know what you are investing in BUT also when you believe in it. If you thoroughly believe Bitcoin will reach the 100K price point then a dip in the market will not deter your thoughts towards this goal and thus making this strategy easier to stomach and ride the proverbial waves. Combine this with repeatable DCA and you have a nice 1-2 punch that will weather any downturn and is less stressful.

CNBC survey: 22% of the U.S. adult population — 46 million Americans — own Bitcoin. 13% of Americans bought or traded cryptocurrency in the first 12 months. In 2021, more than 60% of the group will invest for the first time.
CNBC

Bitcoin is below 100K and Ethereum is below 10K. NFTs are just starting and per CNBC only 13% of Americans have bought/traded crypto. It is still fairly early in this game, but even in your infant stages of your personal wealth journey, it’s good to have a solid plan that is repeatable with ease.