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Why you don't need a big lump sum of money to get into Crypto.



This is probably the first mistake I made with Crypto.


In fact, what's worse I made it even before I got into Crypto because my belief that I needed a decent lump sum to get into Crypto made sure I just delayed taking the plunge by about a year.


My first issue was I would have in my mind that I needed at least $1,000 to get started so I would save up a hundred dollars here and there and then something would happen and I needed to use that money for something else so end result was no lump sum.


My second issue was when I had enough money would that actually be the best time to buy? Would I just buy a load of coins at a time when they were tunnelling their way down to Australia? So these issues combined just made me subconsciously put the whole Crypto thing off.


The penny finally dropped when I came across the concept of "Dollar Cost Average". This simple idea kick started by whole crypo journey as it gave more the clear framework with which to get into Crypto.


The idea of the Dollar Cost Averaging strategy is that rather then saving up and then buying $1,000 of a cryptocurrency in one hit (and potentially running the risk of buying it all at a high price), you instead buy $100 of a cryptocurrency at the same time each day, week or each month, whatever work for your personal situation.


Lets look at what would have happened if I had $1,000 to buy Bitcoin in May 2021:

Date

BTC Price

Investment $

BTC Bought

8th May 2021

$58,958.06

$1,000

0.01696 BTC

8th October 2021

$53,965.18

$915.41

0.01696 BTC


From the table above we can see that in this case we would have ended up with 0.01696 BTC worth $915.41 on 8th October 2021 after 5 months.


If we had start dollar cost averaging $200 in on the 8th May our investment would have looked like this:

Date

BTC Price

Investment $

BTC Bought

8th May 2021

$58,958.06

$200

0.003392 BTC

8th June 2021

$33,402.13

$200

0.005988 BTC

8th July 2021

$32,875.95

$200

0.006083 BTC

8th August 2021

$43,829.15

$200

0.004563 BTC

8th September 2021

$46,396.26

$200

0.004311 BTC

8th October 2021

$53,965.18

$1,313.36

0.024337 BTC


By dollar cost averaging in $200 each month we were actually able to take advantage of the fall in BTC value which gave us more BTC for our money. By the 8th October our BTC value would have been $1,313.36 which is $397.95 higher than had we invested the whole $1,000 in on 8th May.


You could argue that had we invested that $1,000 one month later we would be far better off and you would be completely right but the issue you just don't know the what the price is going to be from one day to the next.


They key takeaway for this article is that you don't need thousands of dollars to get started - you probably just need $100 a month that you invest via dollar cost averaging. If you invest every month like I do after just 12 months you'll have that lump sum invested after all.


Disclaimer


I write this blog for information and education purposes only - this article nor any other article on this blog constitutes as financial advise. I post about what I am interested in and what Crypto projects I am looking at. You still need to do your own research!






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