Risk reduction when hodling cryptocurrency.
Disclaimer: I’m not a financial advisor. This article is written for information purposes only. I am solely an innocent hodl-ganger stranded in cryptoville and my decisions are based on my own research.
What is dollar cost averaging? I want to be a hodl-ganger!
DCA is simply an investment technique that involves buying the dollar amount of a specific share, coin or investment on a regular schedule, regardless of the price (Investopedia, 2018). This was used by the ancient stock investors in the pre-crypto days. Now, they have taught us to reduce risks too as young padawans..or jedi hodl gangers. Let’s see what we can make from their wisdom.
By purchasing a coin on a regular basis, you average out the price you bought it at. If your coin’s value goes up incrementally, so do your gains, thus, increasing your return. But bare in mind, if the value of your investment goes down, then so does your average price, and you may end up incurring a loss. This is very important to note, especially seeing the volatility in crypto currencies such as Bitcoin and other alt-coins cannot be ignored.
This link here: https://for-bitcoin.com/calculator/ is a great source I use to keep track of the gains I make by investing bi-weekly in bitcoin. This strategy involves no trading at all- hence HODLgangers just buy and hold for hours, days, weeks, months, light years…
Although personally, sometimes my gains would drop, after several heart attacks, came a sigh of relief as my general average was up due to an overall uptrend in the market.
What about if you bought at the peak of the bubble in 2013? Well good news, you’d still be hundreds of thousands of percent in gain!
HODLgangers therefore don’t have to time the market. They just invest and wait out the price fluctuations. Cool ey?
Why am I a HODLganger?
For several reasons. I’ve done enough research to believe that the value of bitcoin will rise long term. So it’s a great, stress free way for me to invest with more safety.
Also, the cryptoverse is a fraction of the overall financial market and therefore, still undervalued. With that in mind I do some serious hodling with Ethereum and Litecoin and various other alts of my choice.
The beauty of working full time is that it prevents me from anxiously watching charts all day long and hopping from asset to asset in time. This way, I can focus on long term trends and I am emotionless with regards to daily fluctuations.
Surely there’s a disadvantage
I’ve mentioned it previously. There’s a risk that your average can come down. Additionally, if you’re a wizard day trader that can buy low and sell high… you’ll make a lot more return than your average hodlganger. Nonetheless, I’m risk averse and believe the pros outweigh the cons to wizardry!
Bare in mind you need Jedi mentality to do DCA as you need to hold through some volatility … on occasion. This can be hard for newbies as they see their portfolios swing drastically, but with some discipline you can reap high rewards.
Cool, so how do I become a hodlganger?
You want to use DCA? All you have to do is make a schedule and stick to it. Like a weekly workout! Say, every Friday, you’ll put $25 into bitcoin. It’s pretty simple. With the perks and ease of use of Coinbase, which I recommend. Using coinbase makes your life easier as you can automate the hodlgang procedure using a recurring buy order.
Thank you for taking the time to read this. Feel free to directly contact me in our community or even personally should you have any questions.
You can also directly PM me on twitter @cryptomera if you don’t have my personal details.
I will happily consult for you and help you out on your journey.
As I got an overwhelming request for donations, I’ve decided to put up a tip link for you guys:
My Ether Wallet : 0xC4Fd9C28750feBec4100C34C945802bBB00fFD66
Have a great day!
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