On September 7th we saw a rather large market dip, this was explained in our media article the following day. These dips present great opportunity to exercise the strategies we have been discussing.
Today might be a great day to add to positions you have been building. It might also be a great day for those who have been thinking about entering the market. If you have read some of our other articles in the “Learn” section, you will be aware of dollar-cost-averaging. Moments like this present great discounts for those who buy weekly or bi-weekly. MoC and I like to add to positions every paycheck, but we add substantially more on big red days. These days often referred to as “Bloody Markets” are what set the modest gains from the exceptional gains. Investors who are not afraid to buy dips end up seeing the best returns. We aim to buy into our favorite tokens when the market is beaten down or boring.
The Power of Dollar-Cost-Averaging
A great example can be seen with one of our favorites, Cardano. Those who accumulated last year, even in the later half had a rather boring and non-exciting phase of stagnant price action. These accumulation phases are very powerful as they allow a buyer to keep cost basis low. Cost basis is the average buy price of an asset, this directly effects rates of return when the buyer sells. Averaging in during boring phases, or when the market is beaten down lowers cost basis significantly, and when the market takes a swing back upward, the returns can be beautiful. Any accumulation of Cardano before end of year 2020, set buyers up for great success. By end of January 2021, accumulators were up between 200-800%. Buyers who stuck around until today are up 2000%-12,000%.
It pays to move opposite of the market. Buying tokens that are pumping rapidly in price offers generally much lower returns. This is not to say that investors need to time these dips perfectly. It is 100% acceptable to set aside a certain dollar amount and make weekly or bi-weekly buys. Setting aside 50-100$ a week is a great start especially if focusing on larger market cap projects, or Bitcoin/Ethereum. This safe strategy allows new players in the space to begin building portfolios without as many stomach pains as the lower value projects.
The Coming Weeks
We believe Bitcoin has a high possibility of seeing 44k 42, or even 38k is also possible. Averaging in now could catch the 44k dip if that is the lowest we are going. Setting aside a certain amount of cash to slowly buy into these dips looks favorable. This is a great opportunity for people entering the market for the first time. A few key rules apply to stay safe and increase success. We would not recommend taking all your money you have ready to invest and buying in one fell swoop. Spread the buys out, make bigger buys on those really “bloody” days with big downturns. On the days with bigger upswells, dollar-cost-average less. Or stick with the simpler strategy of set amounts per week. This ultimately comes down to you, and how involved you want to be with building your portfolio.
Both of these strategies are great options, it is never too late to get started, we are still VERY early to the party. Please remember this is not financial advice, this is what has worked for us and our initial group of supporters. These strategies are very common in the stock market and can be translated to any market in the world. We look forward to diving into these markets each day, please check out our other articles if this was helpful.