In this post, we will try to understand more about the Dollar Cost Averaging as an important method of investment into Bitcoin. We will also try to look at DCA (Dollar Cost Averaging Bitcoin Calculator) and how it helps us in showing how this method is extremely powerful.
Before understanding how to use Bitcoin Dollar Cost Averaging Method, we will try to understand what is Bitcoin and why is it so important.
What is Bitcoin ?
Bitcoin is the first successful internet money based on peer-to-peer technology; whereby no central bank or authority is involved in the transaction and production of the Bitcoin currency. It was created by an anonymous individual/group under the name, Satoshi Nakamoto. The source code is available publicly as an open source project, anybody can look at it and be part of the developmental process.
Why is Bitcoin important ?
Generally, Bitcoin attracts people by it’s price action but the fundamentals behind Bitcoin makes it so useful in this internet era. The technology behind it i.e cryptography and blockchain makes it secure and censorship resistant. We all know that the total max supply will be 21 Million Bitcoin. It makes Bitcoin a scarce asset. One can transfer value from one person to other person without any third party like central banks. Many people takes it like a payment digital payment mechanism and confuses it with the transfer of money digitally.
The fundamental difference between transferring wealth using current payment mechanism and Bitcoin is the involvement of banks. In any country, Central banks control the flow of fiat currencies and when we transfer money it’s goes via notifying the central bank. In this way Central bank control the supply of currencies. Central bank is also responsible for printing money and maintaining the inflation rate. But, with Bitcoin no central bank is needed in between two parties as the computer and programs keep track of Bitcoin.
To summarize, none has seen this type of value transfer mechanism in the Human history. In the recent time, people are realizing about it’s multiple use cases. Some are
I hope you are pretty convinced that Bitcoin is a great investment opportunity by seeing it’s fundamentals. Now, we will look how can we invest in Bitcoin.
Dollar Cost Averaging on an investment methodology where we invest a small chunk of money into Bitcoin in a regular interval say monthly or weekly. In this way, you avoid loosing money due to it’s volatile nature.
Let us consider a scenario where you have 5000$, you directly went and bought Bitcoin with all money. But, after some time prices started moving downward, you will miss opportunity to buy at lower price as you have already invested at higher price. To avoid such a scenario, you put a small chunk of money in a periodic way for a longer duration. It means you are buying in all scenario i.e at higher price point and at lower price point. The averaging effect of money gives you a good return and piece of mind as you are not worried about what’s happening to the price.
We have build an exclusive DCA calculator to find your return on the investment amount for the give time frame. You can use this calculator to find the return based on the real Bitcoin historical data.