Purchasing Bitcoin (BTC) when the price is at its lowest during a bear market is said to be one of the most significant keys to building wealth.
After all, even in the worst of bear markets, BTC averages about a 200 percent increase in value annually. Not bad for a digital asset that’s only been around for fifteen years.
But what about building wealth by purchasing the digital gold in the bull market?
Today, with the new BTC ETFs having made a massive positive impact on the price of Bitcoin and with the BTC halving (when the supply of the asset is cut in half) coming up rapidly in mid-April, the price is likely to reach an all-time high of anywhere between $70k and $100k per coin.
It’s a simple matter of shrinking supply vs. incredible demand.
The rapid acceleration in price will not stop there since the aggressive bull market does not kick in until the start of 2025. At that point, the price of a single Bitcoin could be worth anywhere from $250k to $500k.
Even with the price of BTC going up over the course of the next eighteen months, many long-term thinking investors believe that dollar cost averaging (DCA) into the digital asset is still the most conservative yet profitable way to build wealth.
But bear in mind, the road to BTC riches is not always paved with gold. As it is with all cryptocurrencies from large cap to small cap, volatility rules the day.
That’s why many professional traders strongly suggest you never invest more than you can afford to lose.
Also, while crypto has matured over the past four years while achieving mainstream acceptance and recognition by major financial institutions like Blackrock and Ark Investments, scams still plague the space.
Says the professionals at Silver Miller, a crypto scam lawyer, BTC, Ether (ETH), Ripple, Solana, and others cryptocurrencies are transformative digital assets that are traded via online exchanges for fiat or traditional currencies, including the U.S. dollar.
They can also be used to purchase goods and services online. But despite its growing popularity and mainstream acceptance, the volatility and overall lack of regulation of crypto has left lots of investors vulnerable to illegal losses and practices.
When it comes to safe BTC investing, you should either stores your coins in a hard wallet or, if you insist on keeping it on popular platforms like Robinhood or Coinbase, make certain to use all the security features they offer, including two-factor authorization.
Now that you have an idea of the risks associated with crypto in general, how can you DCA BTC to build considerable wealth in both bull and bear markets?
According to a recent report by crypto journalist Laura Shin at CoinDesk, DCA has become one of the most popular methods for investing in the world’s most prominent digital asset. What precisely is DCA?
Defining Dollar Cost Averaging
At base, Bitcoin DCA’ing is an investing strategy whereby you purchase a certain or fixed amount of BTC at regular or semi-regular intervals regardless of the price.
You can set up automatic purchases such as daily, weekly, or monthly, and stick to the schedule over a long period of time, perhaps years.
If you choose not to, you don’t even need to check on the BTC price since you might be playing the long game.
The beauty of DCA is that you reduce the impact of market volatility in the short-term since your predetermined purchases will buy more Bitcoin when the price is low and less when the price is nearing an all-time high.
Thus, the term cost-averaging. DCA removes the emotional aspect that naturally goes hand-in-hand with day trading.
How DCA Works
Here’s how you can effectively DCA Bitcoin:
- > Establish Your Budget: Keeping in mind you don’t want to invest money you can’t afford to lose, set a budget you’re comfortable with investing on a regular basis. Most BTC apps will allow you to invest as little as $10 per day, but the amount you invest is completely up to you.
- > Think about it like this: if you spend $5 dollars every day on a Starbucks coffee in the morning and then another $10 or $20 on a couple of beers at your local bar at the end of the day, why not cut back on those expenditures by $10 and instead invest in your future?
- > Choose Your Intervals: You can decide on investing a regular amount into BTC every day, week, or month. It’s whatever you are comfortable with. If you are married, talk it over with your spouse.
- > Use a Platform that Works for You: You need to find a place online to purchase your BTC. That means finding a reputable platform or exchange that will allow you to buy BTC in recurring payments. Coinbase and Robinhood are two examples of safe, easy-to-use exchanges.
- > Stack Sats: This refers to stacking small increments of one entire BTC (which as of this writing is about $65,000). A sat is short for Satoshi, the man or woman who invented BTC fifteen years ago. Stacking sats on a regular basis can earn you a terrific profit over the long-term.
- > Stay Calm, Stack Sats, and HODL: You might want to consider purchasing a non-custodial hard wallet that will allow you to take your BTC off the exchanges and safely store it off-line. This eliminates the possibility of getting scammed out of your BTC. It also allows you to calmly HODL (which means “hold”) your BTC for as many years as you choose before taking significant profits.
- > Take Profits Along the Way: Since BTC operates based on a four-year cycle which begins with a year-long bear market and culminates with a supply halving, there will inevitably be a four-year high or what’s also known as a “blow-off top.” If you hold all your BTC beyond the blow-off top, you will also ride the price back down in the bear market. A thirty to fifty percent reduction in price during the bear market is not unheard of. This is why it pays to take small profits along the way as the price rises in the bull market. Like the old saying goes, no one ever went broke taking profits.
Again, how you purchase and sell your BTC is entirely up to you. But DCA, while not as glamorous and exciting as trading every day, can earn you considerable profits and wealth in both the sort and long runs.