Beginners Guide to Peso Cost Averaging
In 2020, the Bitcoin halving event occurred. This was followed by a bull market in 2021. In 2024, another Bitcoin halving event took place. Will we see a bull market in 2025?
[This article is in collaboration with PDAX. Make your next money move with PDAX by signing up here!]
With the bull market expected to happen anytime soon, individuals are starting to be active in buying and holding cryptocurrencies for investments.
- Because of the volatility of the cryptocurrency market, many traders are attracted to investing in these assets. Remember the phrase, “high risk, high reward?”
- However, the volatility of crypto makes it also a challenge for traders—especially those who are not that great at speculating trends.
- Because truth be told, it is normal for a token to be up by 15% today and then down by 65% tomorrow. For traders with a low-risk appetite, that could be frustrating.
Enter dollar-cost averaging, a risk management strategy that has been effectively used by traders.
- Luckily, traders do not have to use U.S. dollars to trade cryptocurrencies. Buying a token is now easier by directly using the Philippine Pesos. Thanks to local crypto exchanges, like PDAX, for enabling peso-cost averaging.
Understanding Peso Cost Averaging
Peso Cost Averaging (PCA) is a strategy where a trader will buy a specific crypto for a fixed amount of money at regular intervals, regardless of the token’s price.
- For instance, a trader would like to buy ₱5,000 worth of $BTC every 30th of the month for the next 12 months.
Technically, it is considered a risk management strategy because:
- It reduces the impact of market volatility: PCA softens the impact of market volatility on large purchases of assets, like cryptocurrencies, which experience extreme price fluctuations.
- It avoids timing the market: Because predicting what could happen next in the token is not that easy, PCA helps reduce the stress, anxiety, and overthinking brought by this step.
Advantages of PCA in Cryptocurrency
- It manages high volatility in the crypto market: Because the crypto market is highly volatile, investors can take advantage of it through PCA because there would be no pressure, just consistent buying.
- It achieves better average purchase prices over time: Investing through PCA can lead to a lower average cost per token. It is because the trader buys more coins when prices are low and fewer when prices are high.
- It promotes disciplined investing: Buying an asset for a fixed amount of money at regular intervals is considered a disciplined approach because it is done on schedule and not because of FOMO or hype.
Implementing PCA with PDAX
- Steps to start PCA:
- Choose a token: There are almost 50 tokens available at PDAX. If you consider yourself an aggressive trader, you can try low-cap tokens and meme coins; if you are a chill trader, you can try the top 10 tokens in terms of market cap.
- Determine investment amount and frequency: Make a consistent plan—how much would you like to spend and the intervals, like weekly, twice a month, or even monthly.
- Use PDAX for automated recurring buys: PDAX enables traders to buy tokens using the Philippine Pesos.
Moreover, PDAX has introduced Limit Orders, a feature where traders can specify the price at which they want to execute their trades.
- The Bangko Sentral ng Pilipinas (BSP)-licensed virtual asset service provider (VASP) also shows the market buy and sell price of a token, offering a good user experience.
Tips for Successful PCA
- Diversify investments: Familiar with the phrase, “Don’t put all your eggs in one basket”? The truth is, spreading your investments in several tokens will definitely help reduce the risks associated with crypto trading. This is because even if Crypto #1 is bleeding, there is a chance that Crypto #2 is green.
- Stick to your PCA plan: Be disciplined enough to bear in mind where to buy and how much will be invested. The volatility of the market could be attracting or overthinking, but sticking to your PCA plan can help you mitigate the risks.
- Use PDAX’s educational resources for better decision-making: PDAX has been active in updating market prices. It also releases guides on how to use its features. Enjoy accessing these resources for free to understand the crypto market performance.
Overall, PCA is a big help in reducing the risks associated with crypto trading, especially since the market is so volatile.
- It is advisable for those with low-risk appetites and advantageous to those who do not have enough time or knowledge to understand what is going on with the market.
This article is published on BitPinas: Beginners Guide to Peso Cost Averaging
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