Dollar Cost Averaging – best strat for a bear market

The idea behind dollar cost averaging is a very sound one. If you are investing in either the stock market or the crypto market, dollar cost averaging is probably one of the safest investment strategy (especially for the crypto market where it is so volatile) out there. And it just doesn’t take up too much of your time. Very good for busy the investors who don’t want to spend all their available time in front of the monitor or mobile device. And yes, especially now as we are going into a bear market, investors should consider using the dollar cost averaging strat now. There are quite a few traders I know who are thinking of leaving the crypto market during this bear period. But if you ask me, I think it is not a good idea. They tell me that they are cutting their losses and will only come back during the bull market. But then I ask them, when is the bull market and when will you come back in? “Timing” is kind of difficult to get it right and there is no way to be certain.

I know I know, everybody is also keen to jump in when everything is pumping. I am one of those who used to think that when you see the marketing is green, it is the best time to go in and see it raise to the moon. The price will “definitely” rise and it will never drop back to a certain level anymore. It is the “last chance” to get the coin or token at this price. Does that sound familiar? It happened to me like just one month ago. But as you can see from the recent price action, that is just not true. This is called Fear of Missing Out or FOMO. That is how whales and big investors earn from retail investors. Investors should consider putting in a portion of their funds during a bear market simply because it is a bear market and prices are low. If you enter during a bull market, chances are the prices are already pretty high. And if you buy high, how are you going to make money then?

If you don’t know what Dollar Cost Averaging does, it is pretty simple. Lets assume you have 10K to invest into the crypto markets. But instead of dumping everything all at once (eg. throwing all 10K at once to buy cryptocurrencies), you divide the amount and perhaps buy in once per month. The core idea is that if you buy periodically, there are less chances of a complete burn when things go south. Of course you will probably not gain as much if something moons right? But lets be honest here, what are the chances of that happening? And what are the chances of a retail investor knowing exactly when to sell to maximize the profits? I know of traders with a good sense of discipline who would every month without fail buy a certain amount of cryptos when they receive their paychecks. And the end result is that they did pretty well. It might not be as exciting but I think it works. Furthermore these traders don’t need to spend all their time in front of their computers. Just once they have the pay in the bank, they withdraw and buy some cryptos and then forget all about it. And it is way less stressful as well.

So if you have always wanted to enter the cryptosphere, I believe now is the time. Don’t go all in but spread the risk out by dividing your funds over a longer period. Not just during a bear market, this strategy works even during a bull market. But not only should you spread out your funds for a longer period, you should also get into a variety of cryptos as well. Don’t just stick with one crypto. You should read my post about HODL and spreading risks.