Dollar-cost averaging (DCA) is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. No one can predict where the market is going at any given time, so why even try? Putting your money in an investment all at once - thinking it will only go up - can be a very risky idea. By following a simple practice known as dollar cost averaging, you can protect yourself against market fluctuations and downside risk in the market. By buying a fixed dollar amount on a regular schedule, your focus is on accumulating assets on a regular basis, instead of trying to time the market.
Plan to be spontaneous tomorrow.
With dollar cost averaging, you take a lot of the emotion and fear out of investing because where the market goes in the short-term is far less important to you, as long as you stick to a regular investment plan. If cryptocurrency enters a bear market and your investment falls in value, you’d just end up buying more tokens at a lower price.
For example, let’s say at the beginning of this year, you put $100,000 all at once into a cryptocurrency priced at $100 a coin. By the end of the year, a recession or a dip in the market hits and the coin declines to $70, a 30% loss of $30,000. Instead, what if you evenly distributed your money over the course of the year? Let’s say you decide to invest $25,000 each quarter. When the coin is down, you end up purchasing more coins, and when it’s up, you purchase less coins. This increases the number of coins you purchase and also decreases your average coin price. Instead of holding 1,000 coins valued at $70,000, and losing 30% or $30,000 on your initial investment, you’d hold 1,197 coins valued at $83,790, losing 16% or $16,210 on your initial investment.
Let’s take another example. Here, your chosen coin starts the year at $100 per coin, and then finishes at $90. If you bought at the start of the year, you’d have lost 10% or $10,000. You could have made money dollar cost averaging, even if the coin ends the year down in price. At the end of the year, you would have made $4,580, compared to a $10,000 loss under the other scenario.
The bottom line is that with dollar cost averaging, you can reduce market risk and build your investments over time, regardless of where the market is going.
There are a few things investors should understand before starting their own dollar cost averaging plan:
Dollar cost averaging is a strategy that is better suited for investors with a lower risk tolerance and a long-term investment horizon. This strategy makes the most sense when used over a long time period with volatile investments.
Next, the strategy is no guarantee of good returns on your investment. Dollar cost averaging into an investment that continues to fall each and every month is not a wise move.
Finally, investing involves risk and your own due diligence, so you should only dollar cost average into an investment that you understand and are comfortable with. You shouldn’t just set up an automatic investment plan and forget about the investment, either – it is probably a good idea to regularly check in on it.
was the first cryptocurrency and the Bitcoin network has not been successfully hacked or broken since it was created in 2009. Don't worry about one single bitcoin being valued at many thousands of pounds. Bitcoins can be split into smaller units to ease and facilitate smaller transactions so you can buy fractions of a bitcoin. A satoshi is the smallest unit of a bitcoin, equivalent to 100 millionth of a bitcoin.
was the first alternative blockchain to introduce smart contracts written using the Solidity programming language and opening up the possibility of decentralised finance with globally distributed computing. There are other ecosystems offering these facilities but Ethereum has first-mover advantage and enjoys the largest community of developers. If Metcalfe's Law is valid then if one compared the rate of growth in the number of nodes and transactions on the Ethereum network to the rate of growth in the number of nodes and transactions on the Bitcoin network one might expect the value of ETH to increase more rapidly than the value of BTC. Officially launched in 2015 it has accumulated a staggering market capitalization nearing the half-a-trillion dollar mark. Ethereum is ranked as the world’s second-largest cryptocurrency (by market capitalization) and within a very short period of time has been center stage to some of the most extraordinary returns the world has ever seen.
was the first "oracle" implementation enabling on-chain smart contracts to reference off-chain data from traditional IT systems such as SAP. The Chainlink network provides reliable tamper-proof inputs and outputs for complex smart contracts on any blockchain. The CEO of Chainlink is Sergey Nazarov. Chainlink introduced the ERC677 transferAndCall token standard that lowers transaction costs and enables staking and introduced Chainlink VRF that can generate verifiable random numbers for use in smart contracts. The LINK token is an ERC677 token that inherits functionality from the ERC20 token standard and allows token transfers to contain a data payload. It is used to pay node operators for retrieving data for smart contracts and also for deposits placed by node operators as required by contract creators. The Cross-Chain Interoperability Protocol (CCIP) facilitates the movement of data and value between existing systems and any public or private blockchain.
The DCA approach described above is well suited to traditional stocks, ETFs or mutual funds. However, the special characteristics of the cryptocurrency market means that some tweaks or refinements to this approach can be beneficial. Instead of making quarterly investments, as suggested above, make it a smaller monthly investment. Analysis of how the cryptocurrency market has performed over the past few years indicates that the fourth Sunday of every month tends to be the optimum time to make your regular DCA purchase.
Depending upon market trends and new project opportunities consider investing in a different coin each month. Blockchain technology is developing at an extraordinary pace. Never become emotionally attached to a particular project or coin. The project that was the most innovative and exciting 3 months ago and has recently given you a great return on your investment may now be past its time for maximum growth.
If your chosen coin performed well in the past month it is quite probable that a different coin will perform better in the next month. So don’t always buy the same coin again, especially if the price now appears to be close to its all time high.
If your chosen coin performed poorly in the past month, don’t sell it at a reduced price but consider buying another cryptocurrency this month that may have more potential to significantly increase in value while you wait for the price of your last pick to recover.
Irrespective of whether your last month’s choice appears to have been good or bad take account of the overall market and the hype and trends in cryptocurrency to decide the best market sector from which to select a coin for the next month.
Even in a bear market there will be certain types of cryptocurrency that are, in general, outperforming the rest. What we mean by market sector in this context is the category of “use case” for tokens that currently seem to be popular and are driving market trends. Some examples of “use case” are given below:
- Store of value (e.g. Bitcoin or Decred)
- Privacy (e.g. Monero or COTI V2)
- Layer 0 security and settlement for efficient Layer 1 chains (e.g. Polkadot or Avalanche)
- Layer 1 smart contract platform (e.g. Ethereum or Sui)
- Layer 2 Ethereum scaling solutions (e.g. Polygon (MATIC) or Arbitrum)
- Blockchain interoperability solutions (e.g. ZetaChain)
- Smart contract facilitator for enterprise (e.g. Chainlink or Unibright)
- Real World Assets (RWA) tokenisation (e.g. Maple or Ondo)
- Data and Artificial Intelligence (e.g. Ocean Protocol or Syntropy)
- Co-ownership of AI agents (e.g. Virtuals Protocol)
- Decentralised computing "DePIN" (e.g. iExec RLC or Render)
- Decentralised data storage (e.g. FIL)
- Decentralised finance “DeFi” enabler (e.g. Maker or GMX)
- Digital cash (e.g. Dash or Litecoin)
- Earning rewards using a crypto funded debit card (e.g. Plutus)
- Energy market (e.g. Energy Web Token)
- Currency exchange and interest yielding services (e.g. SwissBorg or Nexo)
- Identity management (e.g. KILT or Lukso)
- Social media (e.g. Theta or Phaver)
- Gaming (visit our METAVERSE page for examples)
- Supply chain and logistics (e.g. Morpheus Network or VeChain)
- Securities trading (e.g. INX)
- Insurance (e.g. Etherisc or Nexus Mutual)
- Web3 enabling technology (e.g. The Graph or Oasis Network)
When you successfully ride a wave and seem to be making a profit don't forget to realise that profit by selling at least some of the coin before it slides back down into the next trough.
blockchain transformation
Companies like Nexo enable you to use your cryptocurrencies as collateral against a fiat loan.
Even if you don't want to borrow fiat, you can earn interest on your newly added assets, buy, sell and swap more than 100+ assets on the Nexo exchange. But be aware that using crypto as collateral for a Nexo loan may be viewed by HMRC as an asset disposal and hence liable to capital gains tax because when it is transferred from your savings wallet into your credit wallet it effectively becomes Nexo's asset and not yours.
Simply investing for growth in a cryptocurrency's value isn't your only option. Some tokens in proof-of-stake (POS) blockchains incentivise you to contribute to the network's security by offering you passive income from the interest you can receive if you stake the tokens.
Some decentralised finance (DeFi) products reward you for locking away your coins for a period to provide liquidity in their trading platforms, but before staking you should beware of long lock-up periods that may compromise your investment agility.
One of the more recent concepts that has emerged is yield farming (also referred to as liquidity mining). It is a way to earn rewards with cryptocurrency holdings using permissionless liquidity protocols. It allows anyone to earn passive income using the decentralized ecosystem of “money legos” built on Ethereum. Yield farmers will use very complicated strategies. They move their cryptos around all the time between different lending marketplaces to maximize their returns. They’ll also be very secretive about the best yield farming strategies. Why? The more people know about a strategy, the less effective it may become. Yield farming is the wild west of Decentralized Finance (DeFi), where farmers compete to get a chance to farm the best crops.
Automated Market Maker (AMM) technology has taken off in spite of one of DeFi's seldom publicised risks: Users who provide liquidity to AMMs can see their staked token lose value compared to simply holding the tokens on their own.
AMMs run the risk of under-performing a basic buy-and-hold strategy. Why "impermanent"? Because as long as the relative prices of tokens in the AMM return to their original state when you entered the AMM, the loss disappears and you earn 100% of the trading fees. However, this is rarely the case. More often than not, impermanent loss becomes permanent, eating into your trade income or leaving you with negative returns. The term "impermanent loss" might be more accurately described as "divergence loss".
These are blockchain protocols that incentivise decentralised communities to build & maintain physical hardware. Users supply hardware or software resources to the network & get token rewards.
DePIN projects can be grouped into:
• Physical Resource Networks (Sensor, Wireless)
• Digital Resource Networks (Compute, Bandwidth, AI, Storage)
• DePIN Module
Each sub-sector disrupts a $1T dollar industry, which means DePIN's upside potential is massive.
Messari predicts that DePIN could add $10T to the global GDP in the next decade (and $100T the decade after). The DePIN sector is projected to reach $3.5 trillion in the next four years.
DAO stands for Decentralized Autonomous Organization. It is decentralized because there is no formal leadership. It is autonomous because it can do anything the members decide. And basically it is just an organization.
The medium article linked by the button below outlines some advantages the DAO over the traditional company and suggests that DAOs will soon replace companies because the structural efficiencies are too powerful to ignore.
The medium article linked by the button below is intended for experienced users. If you have never put assets into a liquidity pool, or don’t understand the difference between Uniswap’s v2 and v3 pools, then maybe you want to read a beginner’s guide to Uniswap pools. On the other hand, if you are a fast learner, you should understand everything in this article. We neither recommend nor endorse the content detail of this article but we reference it as a good introduction to some of the things you need to think about when seeking high returns from providing liquidity in a DEX.
"Sell in May
And go away
Always remember
Come back in September."
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