Bitcoin seems to be on a freefall, with no signs of letting up. Following a good performance in 2021, the sudden market decline portends a long and tough winter for digital currencies.
As the world’s leading cryptocurrency kicks off 2022 with a dizzying collapse, analyst Chris Munch warns against FUD and advises his close-knit group of investors to DYOR.
Right now extreme fear is in the air… during these peaks it was extreme optimism. Not saying now is a good time to buy/sell, but be weary of following the crowd.
Further, Chris points out that we may have reached the bottom of the current bearish trend, but any directional bets are still extremely risky.
Technicals & sentiment suggest we’re further through the current decline than being early in it, and possibly close to a bottom (if not already).
It’s an unstable & volatile industry early on and still over-valued based on fundamentals, so a lot could happen in either direction, so nothing is out of the question.
Considering the current bearish trend and the looming crypto winter, Chris recommends the Dollar-Cost Averaging (DCA) strategy to profit from the market’s extreme volatility.
My personal extremely inexperienced leaning is it’s a good time to dollar cost average (small amounts regularly that you can risk) while sentiment is in extreme fear. Or use a short term trading strategy to profit from the ups and downs along the way.
Strong projects with real users have dropped A LOT – it’s certainly a much better time to be buying now than back in May (the last time I called a crypto top) when most people were buying
Crypto Buying Strategy : Dollar Cost Averaging vs. Lump Sum
Dollar-cost averaging refers to buying stock or funds at regular intervals and in roughly equal amounts. It can have significant benefits for your portfolio if done correctly.
It smooths out your purchase price over time and ensures that you don’t pour all your money into a single purchase at a high price point.
In a bear market, the dollar-cost averaging strategy can be especially powerful, as it allows you to “buy the dips,” or purchase stock at low points when most investors are too scared to buy. This strategy means you will invest at times when a stock or market is down, and that’s when investors grab the best deals.
There are many scenarios in which lump-sum purchases beat dollar-cost averaging. Dollar-cost averaging, however, entails three key benefits that can lead to better returns. They are:
- Helping you avoid mistiming the market
- Taking the emotions out of investing
- Facilitating long-term thinking
To put it another way, dollar-cost averaging protects investors from psychological biases. As the market gyrates, investors are prone to making emotional trading decisions swinging between fear and greed.
However, with dollar-cost averaging, you’ll be buying when people are selling fearfully, scoring a nice price and setting yourself up for strong long-term gains. The market tends to go up over time, and dollar-cost averaging can help you recognize that a bear market is a great long-term opportunity, rather than a threat.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
