Increase Your Crypto Balance with Crypto-Cost Averaging
Let’s get one thing out of the way – I’m somewhat of a cryptoholic. Whenever I can, I’m buying my favourite coins or exchanging other cryptos for it. I’ve a diverse range of coins I follow, but only a few I’m holding tight and growing their balance.
I decided to pen this article after talking with a colleague about crypto. They wanted to get in on the action but the possibility of getting in over their head and losing everything scared them. When you’re first starting out, you might be tempted to go all-in and buy as much as you can as soon as you can. But for newcomers and even for experienced traders that can come with great risk, especially if you’re only looking at the short-term value.
Sure, you could go out and spend a few hundred dollars on whichever coin takes your fancy which would give you an immediate boost to the balance in your wallet. But what if you don’t have that much to spend, or the thought of dropping large sums on crypto is a daunting prospect?
I’ve always been risk-averse. Trust me: the irony of that statement and my obsession with crypto isn’t lost on me. Crypto is generally considered a risky investment yet I’m enamoured of it. It’s considered risky because it’s still young, and the markets swing wildly with the slightest provocation or hint of news.
But I have faith in the long term survival of crypto – some more than others – so I get past that. That’s not to say I didn’t fret over spending a few dollars when I first pushed the boat out on my journey. My solution was very simple. The way I found that makes me the least nervous is buying small amounts each week.
Small amounts don’t bother me as much as a single large outlay would. I looked at my discretionary spending (the little things I was spending money on each week) and added it up. I found with a little change to my habits I could put aside around $10 each week which I then used to buy whatever I wanted that week. I recently discovered this method has its own term – Crypto-cost averaging.
So rather than buying a coffee or lunch every day that money went into crypto instead. Well, let’s be honest here: Not every day because what is life without its little pleasures? But I came up with an amount I’m comfortable redirecting into my passion.
I also don’t stress over the current market value when it’s time to buy. Early on I used to worry about if I was buying too high and maybe I should wait for a drop. “Buy the dip!” people love to holler… but how do you know if you’re buying the dip or there’s more to come?
That way madness lies.
Now I buy at whatever the current asking price is and be done with it. Sure, some of what I’ve bought is now valued less than what I paid for it, but conversely some is valued more so right now it’s a bit of a wash.
In the future though… who knows? The coins I’m holding now which are worth less than I paid might look like an absolute steal a few months or years from now.
Other Methods I Use
It’s worth noting I also hit up faucets pretty hard. Each day I visit my favourite faucets paying out other crypto, all of which I send through to an exchange once I have enough to trade for the coins I want to accumulate. I’ve seen it argued that if you valued your time you put into faucets it’d be cheaper in the long run to just buy crypto.
Where’s the fun in that?
Money won is twice as sweet as the saying goes. Plus I’m doing it in my spare time, watching the TV or while cooking dinner. It’s an easy way to fill in time and get a few coins for doing so. The crypto I get after I’ve converted faucet earnings is, as the saying goes, “money for old rope”. I don’t count coins bought with faucet earnings alongside the ones I’ve bought with fiat, so when I look at my simple profit-and-loss spreadsheet, the freebies I’ve got through faucet exchanges offset much of the coins where I’ve paid above current market price for.
It’s worth restating the number one rule of investing in anything:
Never invest more than you can afford to lose.
For me that’s the price of a few cups of coffee each week. Can’t afford that each week? Do whatever suits you. It doesn’t have to be something you do each week that’s just my system. You need to work out where your comfort level is at and stick with it.
Patience is Key
Don’t worry about having an enormous stockpile of coins right away. Be patient and that’ll come in time. Add to the pile a little at a time whenever you can afford to – each week or every few weeks or any schedule that works for you. Soon enough you’ll have a mountain.
One Final Point
Please know I am not an expert, I’m just a guy with an opinion and a system that works for me. Always do your own research. Run your own numbers. Work out what you can and can’t afford and make your own choice.