Dollar-Cost Averaging: An Ideal Strategy For Crypto Investors in a Volatile Market
Volatility is nothing new to the cryptocurrency market. If you happen to invest in a cryptocurrency and it experiences a sudden increase in value for various reasons, you can be sure that the price won’t remain on an upward trajectory for a long while. The reverse is also true: if the market takes a downturn, your investment can still rise unexpectedly due to the many influencing factors.
While this is the nature of most markets, including those in traditional finance, volatility in the crypto space is often magnified, leaving investors terrified of the implications to their portfolios.
This hyper volatility makes it difficult for investors to determine appropriate entry and exit positions as well as maintain an active investment strategy in the long run. Dollar-Cost Averaging is an investment technique that can help crypto investors take full advantage of this increasing market volatility without being impacted by price swings.
What Is Dollar-Cost Averaging?
From the advent of Bitcoin to the many tokens and cryptocurrencies that have come to the fore, the verdict is clear: the best crypto projects have generated tremendous returns that dwarf those found in traditional markets. In this regard, any investor who managed to enter positions on various projects early can be sure of lucrative returns down the line.
The crypto market’s volatility however requires investors to detach emotions from the volatile price swings that make up most of the market. Dollar-Cost Averaging (DCA) is an investment strategy that adopts a regular fixed dollar amount to buy assets like cryptocurrencies using fiat currency over time regardless of their prices at the time. If well-executed, dollar-cost averaging will allow an investor to buy more of an asset at lower and regular prices, especially if the asset’s price is on an upward trajectory.
For example, if you adopt this approach with $100 every week, you will be able to buy 100 units of a crypto project’s utility token worth $1. 00 each regardless of the token’s price at the time of purchase. If the market takes a downturn, you will be able to buy more units at a lower price. Conversely, if the market experiences an uptrend, you will buy fewer tokens but at a higher price.
In this way, dollar-cost averaging helps to smooth out the buying process and reduces the risk of having your emotions influence your entry and exit positions. For instance, without dollar-cost averaging, an investor would panic sale while the market is experiencing a downturn and FOMO into an asset while its price is rallying. Such an investor would end up with an average entry price that is much higher than the one who deployed dollar-cost averaging.
The Benefits of Dollar-Cost Averaging
Apart from reducing the risks associated with investing in a volatile market, dollar-cost averaging has other benefits that investors can take advantage of.
First, by buying assets at regular intervals, you can pace your investment and reduce the chances of spending all your funds at once. This is especially important for investors who are just starting in the market and have limited funds to allocate.
Second, dollar-cost averaging helps to reduce the impact of emotions on investment decisions. This is because it allows you to buy assets at predetermined prices, thereby removing the need to time the market.
Third, the strategy allows investors to incur lower transaction fees over time by applying a regular frequency to their investments.
Finally, since you know exactly when you’ll be buying an asset with your funds, dollar-cost averaging makes it easy for you to determine when it’s time to exit the market or make use of any other opportunities that might arise.
When To Use DCA?
Ideally, dollar-cost averaging (DCA) should be used when an investor has a long-term investment horizon and is not concerned about market fluctuations in the short term. The strategy is ideal for investors with limited time and funds to invest but looking to spread out their investment over time while gaining a bigger position on projects they believe in for the long term.
Given the nature of crypto and blockchain-based projects, a long-term investment perspective is most suitable as it offers sufficient time to ride out market volatility and take advantage of the long-term run towards a project’s full potential.
iBNB is the first of its kind dynamic investment ecosystem for the decentralized finance (DeFi) space with features that not only educate the average crypto investor but also equip them with trading and investment tools such as the DCA investment strategy. The platform comes with a DeFi bank, a native dividend paying token, and a host of DeFi projects that are vetted under strict rules and conditions to make sure they have a promising future.
Built on the Binance Smart Chain (BSC), iBNB benefits from the scalability of the BSC network and uses the BNB token to distribute dividends to iBNB token holders. The iBNB ecosystem contains the nBNB network, this network is made up of partnerships with various crypto and blockchain-based projects. This provides the iBNB investor community with safe investments in promising projects.
The platform comes with a DeFi bank called iBNB Bank that is designed with smart contracts that are programmed with fiscally sound principles and quantitative algorithms to make sure that transaction fees received across the entire ecosystem are allocated towards strategic growth mechanisms and dividend-paying investments. In return, project teams get access to early funding and the support of an interested community of investors to back up their projects from the start. Investors on the other hand get to invest periodically in safe and promising projects that partner with the nBNB ecosystem.
This is where iBNB’s Grand Cost Averaging (GCA) comes into play.
What is iBNB’s Grand Cost Averaging?
Grand Cost Averaging is a feature on the iBNB platform that is inspired by the dollar-cost averaging investment strategy. This feature allows iBNB investors to diversify their portfolios while reducing risk by automatically investing a predetermined amount of their funds at regular intervals.
The feature is accessible as an investment tool on iBNB’s website and can be used to set up an automated investment plan that would cut into the multiple partner crypto projects hosted in the iBNB ecosystem. This is aimed at reducing the barrier to entry of investing while also removing emotional factors that typically limit the investment strategies of most DeFi investors.
Since the iBNB ecosystem comes with several partnerships and internal projects to invest in, not to mention daily dividends accrues from the network of projects that are iBNB partners, investors can maximize their positions in each of these promising projects using iBNB’s Grand Cost Averaging.
Just as dollar-cost averaging allocates a small portion of funds into several assets, the Grand Cost Averaging feature works by splitting the total amount of BNB an investor is willing to allocate into the iBNB ecosystem into smaller portions that are invested periodically. The investor can even go as far as defining the interval between each investment and the timeframe to complete the investment.
iBNB’s Grand Cost Averaging gives investors an automated tool that they can use to gain a bigger position on a project with a promising future. Investors can also terminate the strategy at any given time and receive 100% of their remaining funds in their wallets.
iBNB’s Mobile and Desktop Accessibility
Apart from features such as Grand Cost Averaging, another aspect of the iBNB platform that gives it an edge over its competitors is the fact that it is accessible through the website as well as a mobile application.
Smartphone users get to access all the features available on the main website, including the Grand Cost Averaging feature. They can also use the mobile application to invest in various DeFi projects that are listed on the iBNB platform. The mobile app is called ‘’my iBNB’’ and comes with an intuitive user interface that simplifies most of the complexities that come with sophisticated investment strategies.
For instance, an investor can plan their investments with access to the Grand Cost Averaging feature by simply going to the “Plan Investment” tab, as seen below.
Afterwards, the investor can set the period of the investment, the number of investments with a clear view of other active GCA investments in their portfolio.
iBNB GCA feature is only one of the tools the platform offers. Other features include a progress page where an investor can view their return on investment for the tokens they hold.
The platform also comes with a portfolio balance tab where investors can keep track of the value of their holdings over time.
Conclusion
Cryptocurrencies are known for their volatility, which can make it difficult for average investors and crypto enthusiasts to gain a good position in the various assets that proliferate the industry. For most investors, the risks of volatility and the possibility of investing in failed projects outweigh the benefits. However, the iBNB platform comes with an arsenal of features designed to make it easier for average investors to take advantage of the growing market as well as the most promising projects.
Thanks to features such as the Grand Cost Averaging, iBNB’s investor community can automate their investments in various DeFi projects while also reducing risk by investing a predetermined amount at regular intervals. And for daily users who are not comfortable with complex and sophisticated investment strategies, the iBNB platform is accessible using a mobile application that comes with an intuitive user interface suitable for crypto enthusiasts. This makes it easier to invest in promising projects without sacrificing their overall portfolio.
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