As it has been reported recently, digital asset exchange, Coinbase has decided to take the time to explain why in crypto markets (when compared to traditional financial markets) “there’s no crystal ball which can predict the perfect time to buy” , how the time tested technique of dollar-cost averaging (DCA) “can make market volatility work in your favor”, and how its platform supports DCA. As Coinbase rightly said on the 7th of June ‘19, its intention was not to give any kind of “investment advice” (since Coinbase is not a licensed/regulated investment advisor), but rather to explain what DCA is, explain how it can be used for investing in crypto, and how its platform’s “recurring buys” feature can help its customers to “take advantage of DCA.”
“Dollar-Cost Averaging is a strategy that allows an investor to buy the same dollar amount of investment on regular intervals. The purchases occur regardless of the asset’s price.” It is not the fastest way to get rich, but it surely does provide “a way for an investor to neutralize short-term volatility in the market he/she is interested in. One very popular use case for DCA is in retirement savings plans sponsored by employers.” The Coinbase blog post said, “Cryptocurrencies like bitcoin have experienced price volatility in the past with values swinging double-digit percentage points in a single day — and sometimes even in a single hour. And once crypto prices start moving, there’s no shortage of FOMO around whether it’s the right time to buy or not,” which can mean “a lot of anxiety, uncertainty, or fear to participate at all.”
When the Bitcoin price is down, investing $100 USD into Bitcoin will allow users to purchase more of bitcoin which will thereby increase the potential profit ‘if the market turns around.” And when the Bitcoin price is up, $100 USD that you are investing will “purchase less bitcoin”, thereby reducing your risk of loss if the price reverses course. Coinbase has an interesting feature called “Recurring Buys” (or more generally, “Recurring Transactions”) on both Coinbase Consumer (Coinbase.com) and on the Coinbase mobile apps for iOS and Android. This feature allows you to invest in cryptocurrency “slowly over time by scheduling buys daily, weekly, or monthly.” For ultimate flexibility, users should go to the ‘Recurring Transactions’ page on Coinbase.com.