It’s officially been 6 months since I first started my Dollar Cost Averaging experiment in the world of cryptocurrency. So what’s the big reveal?
My portfolio is down about 24%…ouch.
Here’s some things that I’ve learned so far through this experiment.
1. Dollar Cost Averaging can be exciting…
Okay, yes, I have been losing money ever since I started this experiment. But crypto isn’t going away and neither am I. Once you establish the initial discipline of sticking to your DCA schedule and refusing to FOMO into the market on every slight pump, Bitcoin becomes far less of an emotional roller coaster. In fact, I get so excited, even in a bear market like this, because while the market is going down, I know that every two weeks I get to experience the satisfying feeling of watching my cost average go down.
2. Nobody knows where the top or bottom is…
“It’s gonna pump!” dumps “It’s gonna pump!” dumps “It’s gonna pump!” dumps “It’s gonna pump!” dumps “It’s gonna pump!” pumps “TOLD YOU!”
This is exactly what the online communities behind most investing markets look like. There is an awful lot of noise, and even if there are people out there who can predict market movements with a fairly high accuracy, I guarantee you they aren’t spending 90% of their time posting about it on twitter.
When I first started my DCA, I was terrified that I needed to get more money into the market, yesterday. Having already seen a 50% market wide pull back across the board I figured it was only a matter of time before we saw the market tear off towards the skies again….That was 6 months ago and we’ve been hemorrhaging ever since. If I had chosen to dump all of the capital I have in the market now, back then, I’d be feeling pretty silly today, and may have ended up backing out of crypto altogether. At the time, to me it looked like we we’re close to the bottom….funny enough I still feel that way today…but to minimize my risk and hedge against the fact that I could be wrong, I will continue to dollar cost average.
3. This market is really not for the non tech savvy
I have to admit, I’m saying this with a bit of reluctance. But when I consider how many steps are involved in my biweekly cost average, how many devices and passwords and verifications and movements I have to go through, in order to make sure I’m doing everything as safely as possible…I really get a sense for just how early we are in this sector.
I love cryptocurrency, I am more passionate about this space and the future potential it holds than just about anything else I’ve ever studied. I choose to spend most of my free time learning about this market and it has inspired me to do many great things and introduced me to many great people. I talk about it to everyone, at work I’ve become known as “the guy who always talks about bitcoin”, my own wife is sick of hearing about it. And, at the end of the day I want absolutely everyone to be involved in Bitcoin and blockchain because I see the growing opportunities here…but I get it, not everyone is ready for this.
Consider the fact that if you own several bitcoin and have them on a trezor you are literally holding tens of thousands of dollars on what is essentially a key-chain. That’s a big step for people. In many ways, a revolutionary change in the way we think about the world and our value and how we store it.
My own father, who I have always considered to be the smartest man I’ve ever met, is a believer in bitcoin…but he only holds a very small amount, not because he doesn’t think it’s worth it, but because he’s slightly intimidated by the technical implications of using Bitcoin safely. Those times are slowly changing.
4. Collecting data is important
If you decide you want to start Dollar Cost Averaging, you will definitely want to keep track of your every move. This may fill you with dread at the very idea, but I have an organizationally oriented mind. I love creating things, and I’ve had lots of fun building my own DCA tracker spreadsheet and adding and building little features into it. But, if you’re not spreadsheet savvy and you really couldn’t care less about creating your own, there are plenty out there for you to use. Cointracking.info is just one example.
The importance of taking the extra 10 minutes to collect this data cannot be understated. For one, it will help you with your taxes, but more important than that (at least in my opinion) it will provide you with feedback on your experiment. Sure, we all want to buy bitcoin today and see massive gains tomorrow, but the reality is that smart investing takes time, and in many cases could take years and years to come to fruition. By collecting diligent data on your experiment, you afford yourself the opportunity to see a visual record of your performance and offer insights into possible room for improvement of strategy. If you plan on holding your bitcoins for 10+ years, you won’t have any tangible feedback on your investments until that first day when you spend some of it…but a spreadsheet of your dollar cost averaging gives you something in the mean time.
5. Don’t lose faith
I’d be lying if I said that I didn’t occasionally have days where that little voice creeps into the back of my head and says something like “really, you’re still buying more of this cryptocurrency stuff? Haven’t you lost enough already? Isn’t it time to just give it up? What happens if you fail? What happens if you’re wrong?”
I crush that voice under my foot. I’m not wrong. Bitcoin is the future. Bitcoin is a revolution. Bitcoin is changing the world and will continue to change the world. This is the most exciting most nascent and most promising market on the planet. Believe that. Strong hands will be rewarded, but you have to be willing to be patient. You have to be disciplined and you have to be confident in your research.
All of this starts with having a firm and solid understanding of why Bitcoin is so important and why money is something EVERYONE should care about.
In closing, I will leave you with one of my most favorite quotes of all time by Theodore Roosevelt. I feel that it’s appropriate here…
“Far better is it to dare mighty things, to win glorious triumphs, even though checkered by failure… than to rank with those poor spirits who neither enjoy nor suffer much, because they live in a gray twilight that knows not victory nor defeat.”