Auto-Invest Strategies in the Fluctuating Crypto Assets Market: Long-term Holding or the Key to Victory

Recently, the Crypto Assets market has experienced significant turbulence, raising widespread concerns among investors about alts. Although this turmoil has caused short-term shocks, in the long run, it may contribute to the healthy development of the market. In the current market environment, high-quality projects will stand out, while low-quality projects will be eliminated.

Most alts have encountered a decline of over 30%. Although mainstream Crypto Assets have also been affected, they remain the market's barometer. This incident has sounded the alarm for small investors: do not bet all your funds on a single coin. A wise approach is to allocate at least 50% of your funds to mainstream Crypto Assets such as Bitcoin and Ethereum.

For those looking to participate in mainstream Crypto Asset investment, a dollar-cost averaging strategy is worth considering. Unlike traditional speculative trading, dollar-cost averaging does not take short-term price fluctuations into account, but instead involves continuing to buy at fixed intervals and fixed amounts. This method is suitable for investors who are not good at technical analysis or who realize that short-term trading is difficult to profit from in the long run.

The cryptocurrency market is highly volatile, and the experiences of the past few years have confirmed this. At the beginning of 2020, Bitcoin fell from over $10,000 to over $3,000, but by 2021, it had risen again to over $60,000. This extreme fluctuation caused many confident short-term traders to get liquidated, and also made some people who resolutely refused to buy the dip miss out on opportunities. In contrast, those who insisted on holding long-term, even if they were caught in the middle, ultimately still achieved considerable gains.

The core concept of dollar-cost averaging is to have a long-term positive outlook on a certain asset. If you do not have a positive outlook on the future of a certain Crypto Asset, there is no need to engage in dollar-cost averaging for it. The advantage of dollar-cost averaging is that by regularly purchasing, the holding cost will tend to approach the average price during the dollar-cost averaging period. As long as the investment time is long enough, usually exceeding one year, the average cost will not be too high. This is because the Crypto Asset market typically follows the pattern of "short bull, long bear", where phases of explosive growth are relatively short, usually lasting only 1-3 months, and for most of the time, prices remain at relatively low levels.

However, dollar-cost averaging also has its drawbacks. It is not a timing strategy, so it cannot guarantee that starting a dollar-cost averaging investment at any time or for any duration will be profitable. For example, a dollar-cost averaging investment over the nearly five months starting from December 2021 could face losses. An even more extreme case is that if Bitcoin falls below $28,000, investors who have been dollar-cost averaging into Bitcoin over the past three years (2020-2022) may face losses.

Therefore, the key to dollar-cost averaging is to choose assets that are bullish in the long term and to have the patience to hold until the next cycle peak. Only assets that appreciate over the long term can offset the impact of timing.

For investors who want to try a dollar-cost averaging strategy, it is recommended to adopt a fixed time and fixed amount approach, choosing to invest once a month or once a week. Since you have chosen dollar-cost averaging, you should try to avoid subjective timing and not frequently adjust your buying amount due to short-term price fluctuations. From a long-term perspective, the cost of a single purchase is not the most critical factor.

The current market environment may be a good time to start dollar-cost averaging. Each significant drop or a decline of over 5000-10000 points in the market can be seen as a starting point for dollar-cost averaging. It is crucial to maintain patience and a long-term perspective during the investment process. At the same time, it is wise to continuously monitor market dynamics and project developments.