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So I've had the opportunity to sit back this week and reflect on my holdings a little bit, and to think more about some serious tips I'd like to share with you beyond just bringing you news about the latest events in the crypto world. Today, I'd like for us to have a chat about dollar cost averaging.
Together with HODLing, dollar cost averaging is a strategy I have adopted in an attempt to increase my crypto holdings through crypto winters and bull runs. And just in case you haven't caught up on some of the earlier definitions I shared on in my initial articles on here, for a quick recap:
- is the acronym for Hold On For Dear Life, and the meaning is self explanatory: Don't sell. Instead, in the projects you believe and hold on to the coins or tokens even when you are tempted the most, even when prices fall drastically or new highs are posted. Hold on for dear life.
- Dollar cost averaging is not just a crypto term, it's used in traditional business investments. With dollar cost averaging, you can do your own research, identify the projects you feel good about and set aside a sum of money, the same sum, which you can use to invest in that project(s) on a regular scheduled basis. So, for example, if you want to invest in ETH and you set aside $200 a month to invest in ETH, you would purchase ETH for that sum whether the price is high or low, regardless. You'd just stick to your schedule. And the thinking is that you'd get more ETH for your money when the price falls, and less ETH when the price is high, but over time, the average price would fall and you would accumulate more and more of your favorite coin. In that way, you won't be biting your nails and spending sleepless nights monitoring every single movement in the market.
This is not to say that you should not pay attention to price movements, it's just that your spending decisions would be less driven by them and would be more strategic because you are betting on the project growing over time. At least that's my understanding of it.
Do Your Own Research
The way I see it, guys, both strategies have merit. In the first instance, you may not have a consistent sum of money to invest in crypto, so you make a one off bid and HODL, and that's fine. My only advice here is to carefully research the coins you are going to HODL because they can just as easily lose value over time.
For example, remember OneCoin, the Bitcoin Killer? No? Exactly.
OneCoin was a scam that really gave the cryptocurrency industry a bad name
This was the story of Ruja Ignatova, the Bulgarian crypto queen. She was going to change the world, she promised, and change the world she did with an alleged glitzy multi-level marketing scam, ripping off crypto investors of $4 billion dollars before disappearing.
Some projects aren't necessarily scams in the traditional sense, some just don't catch on. And so, you want to be really careful. Don't just hop on a hashtag on Twitter. Don't just invest in a project because the charts are green and climbing. Research, read the white paper, try to understand their use case. Some questions you might want to ask are:
- What problem is the team trying to solve?
- Is there real value for what they are doing? Is there a need?
- How is their coin or token to be used in the context of their overall project?
- Do they have competition? How do they measure against their competition?
- What have they accomplished to date? What does their road map look like?
- What is the credential of their team and what background to they have in the cryptocurrency industry?
- What opportunities are there for maybe staking or lending that could also increase your holdings with this coin?
You might even want to look at the price of the coin and where it sits in terms of market cap to have an understanding for its growth potential.
These questions are important because when you choose your projects, if you are going to HODL or even use dollar cost averaging, these aren't going to be short term investments.
Over the past years, cryptocurrency projects have soared and there are investors who have become rich, some accidentally, some through strategic investments. You'd want to be among those, I certainly do. I simply don't believe that a haphazard approach of throwing darts at every project a both mentions or a YouTuber shills on social media is gonna get me there. Of course, I am still grasping investment concepts. There's a lot I am yet to understand, but the little that I do get, the little that I learn, I try to apply it, and I try to learn a bit more every single day.
Anyways, guys, that's where I am for now, adopting a measured approach. I like Bitcoin, but I am not a maximalist, I believe that long term there is room for other projects to develop, and I admit that some of the projects I like are riskier than others. Even so, I am trying not to just invest blindly.
Money is hard to come by for some of us, and so I think, the least we could do is exercise as much diligence and care to invest it as we spend in acquiring it in the first place.
But tell me, what do you think? How do you choose the projects you believe in? Do you believe in investing in cryptocurrency or do you simply trade and spend it? Also, if you invest, what is your strategy for investing? I'd love to know.
Well guys, I'm off again. I'm hearing that a project I like has successfully raised a ton of money from angel investors, and that's piqued my interest. Until we meet again, remember, be safe! Arrivederci!
