Auto-Invest strategies after market turbulence: BTC and ETH may become stable choices

Recently, the Crypto Assets market has experienced a turmoil, with the collapse of a well-known project leaving investors with significant psychological shadows. However, from another perspective, this incident may also have a positive impact on the long-term development of the market. In the current market environment, the rule of survival of the fittest and elimination of the unfit is particularly evident. After this incident, most small market capitalization Tokens fell by more than 30%, while Mainstream Tokens, although also experiencing a decline, still maintain their position as market barometers.

This event has sounded the alarm for investors: do not invest all your funds in a single coin. A wise approach is to allocate at least 50% of your funds to mainstream tokens like Bitcoin and Ethereum. For investors looking to enter mainstream token investments, a viable strategy is to dollar-cost average into Bitcoin and Ethereum.

The dollar-cost averaging strategy differs from regular trading, as it does not consider the highs and lows of prices, but rather invests a fixed amount at regular intervals. Some investors choose dollar-cost averaging because they are not skilled in technical analysis and cannot perform short-term operations; others, after careful consideration, realize that the win rate of short-term predictions is only about 50%, and therefore choose a long-term perspective.

The cryptocurrency market is highly volatile, and long-term participants have a deep understanding of this. The market trend in 2020 was typical: at the beginning of the year, the price was around $10,000, then it plummeted to over $3,000 in March due to the pandemic, and by 2021, it soared to over $60,000. This extreme volatility caused many confident investors to be liquidated, while some decisive investors who left the market missed out on subsequent gains. In contrast, those seemingly "slow" investors, even if temporarily trapped, ultimately achieved substantial profits. In the long run, maintaining investment is more important than choosing the perfect entry timing.

The premise of dollar-cost averaging is having long-term confidence in the target asset. If you do not have a positive outlook on the future of a certain asset, there is no need to engage in dollar-cost averaging. The core idea of dollar-cost averaging is to believe that the target asset will perform excellently in the long run, without being overly concerned about short-term fluctuations.

The advantage of dollar-cost averaging in Bitcoin is that, due to regular purchases, the holding cost will tend to approach the average price during the investment period. As long as the investment period is long enough, such as exceeding one year, the average cost will not be too high. This is because, according to the financial market rule "bull markets are short and bear markets are long," the explosive growth phase of Bitcoin usually lasts for a short period, generally no more than 1-3 months, which means that for most of the time, the price is within a relatively reasonable range.

However, dollar-cost averaging also has some limitations. As it is a "timing agnostic" strategy, there is no guarantee that starting a dollar-cost averaging investment at any point in time or for any duration will yield profits. For example, dollar-cost averaging from December 2021 to now, nearly 5 months, may currently be in a loss position. A more extreme case is that, as of now, the 1000-day average price of Bitcoin (approximately equal to the three-year dollar-cost averaging cost) is around $28,000. If the price of Bitcoin falls below this level, investors who have adhered to dollar-cost averaging for nearly three years (2020-2022) may face losses.

Therefore, the principle of choosing a fixed investment is to select a "long-term bullish target" and to have the patience to stick to it until the next cycle peak. Only assets that appreciate over the long term can offset the risks brought by timing.

For a dollar-cost averaging strategy, it is recommended to adopt a fixed time and fixed amount approach, with options to invest once a month or once a week. Once you choose dollar-cost averaging, you should minimize subjective timing and avoid adjusting the investment amount based on personal judgment. From a long-term perspective, the cost of a single investment is not the most critical factor.

The current market environment can be seen as a good starting point for dollar-cost averaging. Every time there is a significant fall or a drop exceeding 5000-10000 points, it can be considered as a starting point for dollar-cost averaging.

Overall, a dollar-cost averaging strategy requires investors to have a long-term perspective and patience. It may not be the fastest way to profit, but for those who believe in the long-term development prospects of crypto assets, it may be a relatively robust investment approach.