Auto-Invest Strategies in a Volatile Market: Bitcoin Long-term Investment Guide

Recently, the crypto assets market has been volatile, raising investor concerns about alts. From a certain perspective, this event actually contributes to the healthy development of the market. In the current market environment, the survival of the fittest and the elimination of the weakest rule is particularly evident. Most alts have fallen by more than 30%, while mainstream tokens, although also impacted, remain the barometer of the market.

This incident has sounded the alarm for retail investors: do not invest all your funds in a single coin. A wise approach is to allocate at least 50% of your funds to Bitcoin and Ethereum. For investors looking to venture into Mainstream Token, a dollar-cost averaging strategy is worth considering.

Dollar-cost averaging in Bitcoin is different from regular trading. In traditional trading, investors often decide the amount to buy based on price highs and lows. However, dollar-cost averaging involves regularly purchasing a fixed amount regardless of price fluctuations. Some investors choose dollar-cost averaging because they are not skilled in technical analysis and cannot engage in short-term operations; others recognize that the long-term win rate of short-term predictions is only around 50%, thus opting for a long-term perspective.

The crypto assets market is highly volatile, with the market in 2020 being a typical example. At the beginning of the year, the price of Bitcoin was around $10,000, but in March, it plummeted to over $3,000 due to the pandemic, and by 2021, it skyrocketed to over $60,000. Those who were resolute in not buying the dip missed the opportunity, while those who insisted on dollar-cost averaging, even if they were once trapped, ultimately gained considerable returns. In the long run, staying in the market is more important than pursuing the perfect buying price.

The premise of dollar-cost averaging is having confidence in the underlying asset. If you are not optimistic about a certain asset, there is no need to dollar-cost average. The core of dollar-cost averaging lies in believing in the long-term value of the asset and not overly focusing on short-term fluctuations.

The advantage of dollar-cost averaging in Bitcoin is that, due to regular purchases, the holding cost will approach the average price during the investment period. As long as the time is long enough, usually over a year, the average cost will not be too high. According to the financial market's "bull short bear long" rule, the explosive growth phase of Bitcoin usually does not last too long, generally only 1-3 months, which means that for most of the time, the price is relatively reasonable.

However, dollar-cost averaging also has its limitations. As a "time-agnostic" strategy, it cannot guarantee profits at any starting point or over any duration. For example, from December 2021 to nearly 5 months now, investors who dollar-cost averaged for a year might face losses. A more extreme example is that the 1000-day average price of Bitcoin is currently about 28,000 dollars; if the price falls below this level, investors who have dollar-cost averaged Bitcoin over the past 3 years could incur losses.

Therefore, the key to dollar-cost averaging is to choose assets that are expected to rise in the long term and to hold on until the next cycle peak. Only assets that increase in the long term can offset the impact of timing.

When implementing a dollar-cost averaging strategy, it is recommended to adopt a fixed time and fixed amount approach, choosing to buy at a set time every month or week. Since you have chosen dollar-cost averaging, you should try to avoid subjective timing and not frequently adjust the purchase amount due to short-term price fluctuations. In the long run, the cost of a single purchase is not the most important.

The current market environment can be seen as a good starting point for dollar-cost averaging. Whenever there is a significant drop or a decline of more than 5000-10000 points, it can be considered as a starting opportunity for dollar-cost averaging.