The idea of buying crypto is scary to many people. How they should buy and when they should buy are the first two questions that crypto newbies tend to ask.
With the latest run in crypto, I've been talking again to many people who know that I'm highly involved in crypto. These people are friends, family, Twitter people, etc. Everywhere and anywhere.
When Bitcoin spikes, people come out of the woodwork looking to get involved.
So yesterday, I published a post answering these two very important questions. In fact, the answer - to buy $10 worth of BTC per day no matter what - is the exact advice that I have given out for years now.
The post I did yesterday explored some research that I put together about the historical performance of this strategy. I think it's extremely important to illustrate this idea that you can be a successful crypto investor without actually having to spend all your time here in the space.
I got a lot of interest in yesterday's post - from friends/family and on social - so I thought it would be interesting to follow-up with a study of this strategy for Ethereum, BAT and HIVE.
In this post, we'll take a look at buying $10 worth of ETH each day for the past 2 years and see how it performs:
Dollar Cost Averaging - $10 Worth of ETH Each Day for 2 Years
If you're curious about how I get this data, I download the historical price and then just plug it into a spreadsheet and simulate the purchase of $10 worth of ETH each day. The daily buy simulation looks like this:
If you bought $10 worth of ETH every single day for the past 2 years, you would have ended up buying 41.211 ETH in total at an average price of $177.62/ETH. Spending a total of $7,320 USD.
Today, ETH is worth about $330-$345 USD. I input $335 for the current value figure (simulating what you might sell it for if you liquidated today) and your 41.211 ETH would be worth $13,805 USD.
So in 2 years, you would have gotten a 88.61% return on your initial investment (44.30% annualized).
To give this 44.30% per year figure some context... let's compare it to the Bitcoin simulation I ran yesterday:
Investing in ETH has been more profitable than investing in BTC (at $10 per day). This is not to say that you should only buy ETH or only buy BTC, but rather to add some context to the annual return of the top cryptocurrencies.
If you want to take this a step further, consider that many index investors, hedge fund/mutual fund buyers, etc. earn an industry average of 6% per year on their equity portfolios.
Would you rather take a low risk investment and make 6% per year or take a higher risk investment and make 44.30% per year or 33.79%?
Preserving Wealth vs. Building Wealth
I think some mix of those investments is the correct answer (for most people), but it boils down to personal risk tolerance and investment objectives. If you've got a lot of money, then opting for 6% might be all you need to preserve your wealth.
If, however, your goal is to build wealth as opposed to simply preserving what you've already got, then you need to be informed about strategies of investing that involve a higher level of risk but a higher level of reward.
In my opinion, cryptocurrencies are one of the most asymmetric risk/reward opportunities in the world. The potential is validated by this research.
Strategies like buying $10 worth of ETH or BTC every day regardless of price are mainly for the people who are interested in investing in crypto, but don't want to take the time to be involved heavily in the space.
There are many people out there who fall into the category of people who:
- want to build wealth
- earn a steady income
- are open to alternative assets
- don't have time to check crypto prices each day
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