In this lesson, we look closely at why cost averaging is a good strategy for buying bitcoin.
What Is Cost Averaging?
‘Dollar-cost averaging’ is a popular investment strategy that works for any asset. In our case, it means to buy bitcoin regularly and accumulate smaller, fixed dollar, euro, or swiss francs amounts of it each week or month.
By doing this over a longer period, you level out the volatility, and the overall price you paid when buying bitcoin is an average of all the lows and highs the asset went through over the past months or years.
Why Is Cost Averaging Useful?
While you can also go with a one-time buy (aka ‘lump sum’), cost averaging has a couple of nice side effects.
- Cost average effect: Bitcoin is still quite volatile, meaning that the exchange rate in EUR or CHF can fluctuate even over short periods. By auto-investing let’s say every week, you can level out the volatility.
- Peace of mind: You don’t have to worry about price fluctuations by auto-investing in bitcoin. You take out the typical ‘fear of missing out’ and just can relax by knowing that you automatically buy a certain EUR or CHF of bitcoin each month.
- Save Relai fees: An additional upside you get as a Relai user is that you can reduce the fees you pay with each bitcoin investment when you set up an auto-invest plan instead of doing it manually.
How Do I Cost Average Into Bitcoin With Relai?
Cost averaging is a core feature of the Relai app; you even get reduced fees by using it!
You just need to follow three simple steps, and you’re good:
- Go to the buy screen and type in the amount of BTC you want to auto-buy (in EUR or CHF). Next, choose whether you want to make weekly or monthly purchases.
- Set up a recurring bank transfer for the amount of BTC you plan to buy to complete your bitcoin auto-investing setup. You don’t need to put a transaction reference as Relai knows that the payment is coming from you from your IBAN.
- ‘Dollar-cost averaging’ (DCAing) means regularly buying bitcoin and accumulating smaller, fixed dollar, euro, or swiss francs amounts each week or month.
- By DCAing you can level out the volatility, plus you don’t have to worry about buying at the right moment. So you get a (potentially) better average price with less stress.
- You can save fees when you set up an auto-invest plan with Relai. You can buy weekly or monthly and put your bitcoin investing on autopilot.