One of the keys to investing and gambling success is managing your bankroll. There are many strategies and ways to do this. However, one of the most popular ways to manage risk is related to a concept called cost averaging of the dollar.
What is dollar cost averaging?
Dollar cost averaging is essentially the practice of averaging a potential acquisition or desired level of investment over weeks or months, rather than investing a full lump sum at once. The purpose of practicing dollar cost averaging is to reduce the effects of volatility in the short term while achieving their long-term investment objectives and investing in a manner that provides the desired level of market exposure and thus the desired level of exposure. risk versus reward.
Gambling on Bitcoin, hedging risk with dollar cost averaging
PlanB is the username of a Twitter user known as the whale / senior investment advisor in Bitcoin. Also known as PlanB, he made a popular hypothesis about the future price of Bitcoin. The stock flow pricing model. The stock flow hypothesis argues that a decline in the supply of new Bitcoin over time, accelerated by a Bitcoin halving event that occurs approximately every four years, will continuously increase the price in the long run.
PlanB notes that anyone who has invested in Bitcoin on a sliding scale system from 2017 until this year would have reaped a return of up to 70% during this period. Considering the average annual return in a well-diversified stock portfolio or real estate investment, usually around 10%, gaining seven times the return through dollar cost, averaging Bitcoin’s position is a huge profit.
Bitcoin Gamble with 70% yield
The strategy works like this: An investor buys Bitcoin in 2017 as the price rises, slowly increasing his investment. As the price peaks at the end of the year, investment would continue to rise steadily, but the amounts would fall as the price drops (which a smart investor would definitely do, given how many hoops there were around Bitcoin and the fact that excitement was ridiculously high). achieved).
Consistent investment during 2018, while decreasing the monthly amount (or any chosen payment frequency and then increasing your investment again in 2019) would have resulted in a 70% return on all of your major investments over three years.
He would have dispelled his gambling in three years and seen his bankroll rise significantly.
Can Bitcoin gamblers and investors keep bringing the average dollar cost forward?
As they say in investing and Bitcoin gambling: The history of the past does not necessarily dictate future results. So the big question is, can those who are considering starting big on Bitcoin use a one-dollar cost averaging strategy and still be successful ??
The question must be answered in the affirmative. While Bitcoin is relatively new to the investment and gambling scene compared to other forms of both activities, the concept of dollar cost averaging has always been a tried and tested method of managing risk and reward.
Think logically, is it better to dip your toe in the water and slowly go into the water when you realize sharks are swimming around you? Or is it better to jump in your head first and let the sharks see you alive?
Risk management is clearly the better approach. In investing and gambling, it’s not just the selection of winners that matters. He survived long enough to learn and has the money to continue investing in Bitcoin once he knows what he’s doing. In part, that’s why dollar cost averaging works so well.
Invest in Bitcoin over time. Deal with volatility and enjoy the benefits in the long run instead of focusing on the short term. This is the key to success.