The cost-average effect is an investment strategy in which a fixed dollar (or euro) amount of an asset is purchased on a regular basis, regardless of the asset's current market price.
The idea behind this investment strategy is to build your investment in a particular asset while reducing the impact of market fluctuations by buying the asset over time at an average price.#
For example, you could buy a EUROSTOXX 50 index tracker fund worth €50 every month on the same day (regardless of market conditions) if you want to gradually increase your investment portfolio with European stocks. In fact, this is a very common way of investing among private investors and is called a fund savings plan.
However, you can apply the same investment concept to the Investment in Bitcoin apply.
Bitcoin is ideal for dollar-cost averaging because it is a relatively volatile asset with high growth potential.
The main advantages of the Bitcoin cost-averaging effect are as follows:
Since you buy Bitcoin at regular intervals at the current market price, you smooth out volatility by buying at an average price over a long period of time. This reduces the impact of volatility on your investment portfolio.
With an automated Bitcoin savings plan, you can start dollar cost averaging with Coinfinity from as little as €21. This means that even investors who can only afford to set aside a small amount each month for investment can start building a fortune in Bitcoin.
Finally, Bitcoin dollar cost averaging has the potential to increase the value of your investment over time through compound interest. So not only are you earning potential returns on your initial investment, but also on each monthly deposit into your Bitcoin savings plan. Therefore, compound interest can potentially increase the return on your bitcoin investment over time.
Not surprisingly, many Bitcoin advocates recommend setting up a Bitcoin savings plan where you automatically buy a small amount of Bitcoin each month, regardless of the market price.
Let's now take a look at the historical performance of Bitcoin dollar cost averaging.
If you had invested in a Bitcoin savings plan three years ago with a monthly deposit of €100, your Bitcoin assets would be worth over €9,000 today. This corresponds to a three-year return of almost 160%.
In contrast, if you had bought Bitcoin exactly three years ago at $10,978, you would have generated only a three-year return of about 75%.
On the other hand, if you had created a Bitcoin savings plan five years ago, your Bitcoin assets would be worth about €27,700 today. That would be a five-year return of about 360%.
In this investment horizon, a one-time purchase five years ago would have generated a return of approx. 640%.
These two examples illustrate an important aspect of the Bitcoin cost-averaging effect:
In times of volatile markets, dollar cost averaging is usually better than a single large bitcoin investment. However, if you manage to make your bitcoin purchase in time for a bull market, a large single investment will probably do better than dollar-cost averaging, even if the volatility is much higher.
A Bitcoin Savings Plan is one of the best ways to invest in Bitcoin. Especially for investors who want to set aside some money every month for investments, a Bitcoin savings plan is well suited, as you can invest in the digital currency from as little as €21 per month with the Coinfinity Bitcoin savings plan.
Let's take a look at how you can create a Bitcoin savings plan on the Coinfinity Bitcoin portal:
2. once you have completed the AML questionnaire and identity verification, click on "Create Savings Plan" in the Dashboard menu
You can start a Bitcoin savings plan with only 21 EUR per month, which you can cancel at any time by simply cancelling your standing order. This gives you complete flexibility as a Coinfinity user:in
4. all that is needed to create a bitcoin savings plan is to register and verify with Coinfinity, the amount you want to save in bitcoin each month, and your bitcoin wallet address where you want your bitcoin sent.
After clicking on "Create savings plan" in the order overview, you will receive instructions on how to set up your standing order.
And that's it!
Once your payment is received by Coinfinity, you will get your coins into your bitcoin wallet via Bitcoin Savings Plan.
A crypto savings plan probably makes sense as long as you're saving in bitcoin.
Bitcoin has a proven limited supply and programmed disinflationary monetary policy that allows the digital currency to gain value as adoption increases over time. Other cryptocurrencies, known as altcoins, generally do not have Bitcoin's unique advantages, making them less suitable as savings vehicles.
Setting up a Coinfinity Bitcoin savings plan is free of charge. Only the usual 1.5% service and mining fees apply.
Whether saving in Bitcoin is right for you or not is something only you can decide.
However, as a digital asset with a proven limited supply, deflationary monetary policy, and increasing demand from a wide range of investors, Bitcoin is well positioned to gain value in the future.