How Do We Invest into the Market Now? (You Will Want to Read this)

Let’s discuss how to Dollar Cost Average and some strategies to think about.

Now, admittedly, this is a long one, so grab a tea and let’s begin!

Firstly, what an incredible start to 2024. I’ve been calling it a popcorn year for Crypto, and we are not even halfway through.

So far, we have had BTC break through previous all time highs (prior to the BTC halving).

Institutions are moving in fast

The halving is just over a week away

Retail money is yet to really pour in

The alt market boom hasn’t officially begun

And the list goes on!

In other words… when it rains, it pours in Crypto.

And right now, it’s hard to be bearish.

Now let’s discuss the market.

Right now, we are still in the pre-bull market phase and until the halving happens we are considered to be in the ‘Danger Zone’. This means price volatility and, for the savvy investor – cheaper cryptos and market re-entry points.

Post halving, the ‘Danger Zone’ will convert into the Re-Accumulation zone until later this year (perhaps September). And once again, the investor will be presented with re-entry points and natural pullbacks all the way to our expected (and much-loved) bull market. It is projected that Bitcoin will fluctuate between US$60k and $70k approximately within this zone.

Based on cyclical history, we could anticipate the official start to the bull market in November, but based on how this year is performing, this could come a fraction earlier.

So how do we enter capital into the market right now?

Well, there are two ways.

Dollar cost averaging (DCA)
Or Investing directly.

Dollar cost averaging allows you to invest in incremental amounts and reduce the volatility that your portfolio may experience because you are potentially lowering your average investment price.

For example – you may purchase Bitcoin at US $60k, $65k, $58k, $55k, $70k – and your average figure is somewhere in between all that.

However, had you dived in when BTC was $70k US, your average would potentially be a lot higher.

You get the idea.

Now, for some, DCA doesn’t apply to them, and they prefer to allocate their entire position into the market. This is because they may see the long term price trajectory and the 5-20% saving is negligible in comparison to what they believe their portfolio will be worth in the future.

It’s essentially personal preference.

When it comes to DCA, here are some considerations:

How much will I invest into the market in total?
In what increments will I allocate these funds?
Will I be reactive? Meaning if something causes a significant dip, will I allocate more at that moment?
A smaller capital investment means I will hold less coins or not? And have larger holdings with a small portfolio?
Do I have all the capital available now or do I intend to flow some additional capital into the market later? (or both).

To help, I have provided some educational examples below to prompt thinking and questions in relation to your own portfolio.

CASE STUDIES:

Susan and John Invest $2,000:

They are going to invest the entire $2,000 in one go because the impact of using DCA will be less noticeable (and dramatic). DCA doesn’t really make sense for Susan and John.
They want to hold only 4 coins and allocate $500 to each so that they have substantial capital in at least four coins. Rather than $100-200 on many coins. If one coin doubles, they will make $500, as opposed to $100 or $200 extra.
They are looking long term not short term.
They are interested in holding at least 2 speculative medium to higher risk coins because, in their mind, that would have the potential to move a little higher as those coins have a smaller market cap with a promising timeline ahead.

Maxine has $3000 + $600 per month to allocate:

Maxine plans to copy Susan and John
She also has 4 other Cryptos she wishes to own and each month she intends to put some money towards these extra Cryptos she wishes to accumulate.
– Month 1: $300 to Crypto A, $300 to Crypto B
– Month 2: $300 to Crypto C, $300 to Crypto D
– Month 3: $300 to Crypto A, $300 to Crypto B
– Month 4: $300 to Crypto C, $300 to Crypto D
In total, she will then own $600 of Cryptos A, B, C and D after four months.
Plus, she has her other portfolio she bought immediately at the start of her investment journey.

Mark has $15,000 ready to go:

He will use DCA to invest in 3-4 batches of money:
– Allocation 1: $3000
– Allocation 2: $4000
– Allocation 3: $4000
– Allocation 4: $4000
They will be allocated with two weeks between due to the timeframe of investing and given the bull market is starting in a few months,
He is looking to hold at least 6-8 coins so that he has some significant capital deployed on each Crypto.

Harry and Madeleine are ready to invest $100,000:

They will use DCA in 10 or less x $10,000 amounts.
They are planning to hold 10-15 Cryptos in varying growth sectors.
They will allocate at least $10,000 for the first 3 weeks, and then fortnightly after that, until $100,000 has been reached.
They are using the model portfolio to choose their holdings.

Robert invests directly with $30,000:

Robert is time poor but also has been investing for a long time.
He doesn’t mind the short term volatility because he understands the long-term game.
Short term fluctuations are irrelevant in his mind because he has invested an amount he is very comfortable having sitting in the market and ‘do its thing’.
He is buying 6 Cryptos with $5k approximately on each (slightly more on the conservatives).
He will allocate these funds at once.

Another thing to add to the mix…

For many investors, they think that perhaps they need to allocate all of their capital now, but there is another way you can do this which may or may not suit you.

Some investors hold a percentage of their capital back after they have DCA’d or invested directly in the market (for example, 20-30%) and wait to see which Crypto’s in their holdings are performing very well. They then, in the early phase of that run up, allocate additional funds to the Cryptos that are outperforming.

This has been a successful approach for investors because they reduce any potential risk of a crypto under performing and save time waiting in the pre bull run up phase.

Food for thought.

Some concluding points…

Now do you see, based on these case studies, that there is never a cookie-cutter approach to entering this market?

But rather what suits you!

Always invest in a way that makes sense to you and your lifestyle.

Remembering that whilst there is no right or wrong way to do it, having a plan will automatically place you miles ahead of the crowd.

On a final note – let’s chat about GAS fees – because it’s important!

Every time you engage with the Ethereum blockchain (or any blockchain for that matter) you are paying GAS fees. These are also known as network fees.

During a bull market – the fees can become very expensive – $10 USD – $150 USD (even higher) every time you sell something, unstake or swap, move off an exchange or simply move it from one private wallet to another.

So, if you are buying using DCA with a smaller portfolio, in some cases, it makes sense to temporarily hold all of that Crypto on the exchange for a short time and then move it all at once. This means you will pay one fee – not 10.

And trust me. It adds up.

If you are investing a very large amount, the gas fee is worth paying because holding tens of thousands on an exchange to save on gas fees simply doesn’t make sense (with regard to risk).

While we never recommend long-term holdings on crypto exchanges, we can strategically hold (for smaller investment portfolios) when we’re in a bull market and fees are high. It goes without saying you’ll need to use an exchange that is well-known, trusted and highly regulated.

As a rule of thumb, in Australia, gas fees typically are cheaper on the weekends (mostly Sunday).

In Summary:

I hope this has provided some clarity on how to enter this market the safely and right way plus got you to think about some things you may not have considered in the past.

Invest smart, keep emotions away and enjoy the journey!

Remember, no one has a perfect buy or sell record, and it is better to get some skin in the game, then overthink or procrastinate or ‘wait for that perfect dip’.

Start now, start reasonably, and you are bound to be successful.