Bitcoin Auto-Invest Strategy: A Robust Choice to Withstand Market Fluctuation

Recently, with the collapse of a well-known crypto assets project, many investors have developed concerns about various small market capitalization tokens. However, from another perspective, this event may also have a positive impact on market development. In the current market environment, the principle of survival of the fittest and elimination of the weakest is particularly evident. After this collapse, most small market capitalization tokens fell by over 30%, while mainstream large-cap coins, although they also experienced a decline, remain the market's barometer.

This event has sounded the alarm for retail investors: do not invest all your funds in a single coin. A wise approach is to allocate at least 50% of your funds in mainstream Tokens like Bitcoin and Ethereum. For investors looking to invest in mainstream Tokens, a feasible strategy is to dollar-cost average into Bitcoin and Ethereum.

Dollar cost averaging strategies differ from regular trading in that they do not consider price levels but instead involve regularly buying a fixed amount. Some investors choose dollar cost averaging because they do not understand technical analysis and cannot perform short-term trades; others recognize that the success rate of short-term predictions is only about 50%, and therefore choose a long-term perspective.

The cryptocurrency market is highly volatile, and investors who have experienced it have profound insights. The market in 2020 was particularly impressive: at the beginning of the year, the price was over $10,000, plummeting to over $3,000 in March due to the pandemic, and then climbing back up to over $60,000 in 2021. This extreme volatility led to many reputable forecasters who predicted no significant drop facing liquidation, while those who resolutely avoided buying the dip missed out on the opportunity to profit. In contrast, those investors who remained calm during the process, even if they were once stuck in a position, ultimately achieved considerable gains. In the long run, staying in the market is more important than pursuing the perfect buying price.

If you are not optimistic about a certain investment target, there is no need to engage in regular investment. The premise of regular investment is that you are confident in its future and believe it will perform well in the long term, regardless of how the process unfolds, you must persist in "staying in the market."

Short-term predictions, although there are successful cases, will always have missteps. The problem is that once you miss a key explosive rise (such as the market in 2020), the losses can be very regrettable.

The advantage of dollar-cost averaging in Bitcoin is that, due to regular purchases, the holding cost will be close to the average price during the investment period. As long as the time is long enough, for example, more than a year, the average cost will not be too high. According to the financial market rule of "bull markets are short and bear markets are long," the explosive growth phase of Bitcoin usually does not last long, generally only 1 to 3 months, which means that most of the time the price is relatively reasonable.

However, dollar-cost averaging also has its limitations. As a "timing-agnostic" strategy, it cannot guarantee profits at any entry point or duration. For example, investors who have been dollar-cost averaging for nearly 5 months since December 2021 may be in a state of loss. A more extreme example is that the 1000-day average price of Bitcoin (approximately the cost of 3 years of dollar-cost averaging) is around $28,000. If the price of Bitcoin falls below this level, investors who have been dollar-cost averaging Bitcoin for nearly 3 years (2020-2022) may face losses.

Therefore, the core principle of regular investment is "choose long-term bullish targets" and stick to them until the next cycle high point. Only assets that appreciate over the long term can offset the issues brought about by timing.

In a dollar-cost averaging strategy, timing and amount are quite important, and you can choose to invest once a month or once a week. Since you have chosen dollar-cost averaging, you should try to minimize subjective timing and avoid changing the investment amount due to personal judgment. In the long run, the cost of a single investment is not the most important factor.

From the current market situation, the current price level can serve as a starting point for regular investments. Each time there is a significant fall or a decline of more than 5000-10000 points, it can be seen as a good opportunity for regular investments.