Please welcome a new superstar to the Coinberry features roster! Our development wizards at Coinberry have implemented a systematic crypto purchasing feature called AutoPilot.
AutoPilot might seem like a new concept for crypto but is, in fact, a known strategy in investing, for the long term, called dollar cost averaging.
When markets fluctuate a user can purchase cryptocurrency for a lower cost in a falling market, will not time their purchase to avoid a peak in a rising market, and will stay invested in a rather flat market — ensuring that over the long run the troughs and the highs will average themselves out leading to an “average” cost which could reduce exposure to the volatile crypto market fluctuations — avoiding the strong temptation to “time the market”.
Timing the market is akin to catching a falling knife and hoping to catch it whilst not getting cut in the process. The problem is usually attributed to the fear and uncertainty of a further plunge, even if a person believes in the long run viability and success of the asset, and therefore would sell when prices are low — therefore actualizing their loss. The opposite issue is buying when the price is too high, therefore not being able to participate in further gains due to the fear of missing out.
How does crypto averaging work and what are the benefits?
If a user started in January of this year purchasing $1000 worth of Bitcoin on the 1st of January, and on each subsequent first of the month until May 1st the prices would have been the following from January 1st 5038.7, 4506.06, 5023.31, 5478.82, to 7088.7 on May 1st. The amount of Bitcoin owned would have been 0.94 Bitcoin and would hold an average price CAD of $5301.95.
The user would have been systematically putting in $1000 each month and would have purchased 0.2 Bitcoin in January, 0.22 in February, 0.20 in March, 0.18 in April and 0.14 in May.
At the most current price of $7088.7 in May, multiplied by the 0.94 of Bitcoin owned, with a weighted average price of $5301.95, the $5000 invested on a monthly basis would now be worth $6685.00.
The return would vary for a lump sum purchase of $5000 throughout the period from January to May, but the auto payments ensure a disciplined approach to the purchases — avoiding the emotional roller coaster of crypto markets.
Auto payments are also great for users that are new to the crypto markets and would want some exposure in their portfolios to crypto assets as the stress of the decision of when to buy is removed with systematic automated payments.
Drawbacks of AutoPilot
The drawbacks of autopayments would include a consistently rising market in any of the currencies offered.
A lump sum payment purchased at the beginning of the rising period would net a higher return versus a monthly purchase as you are purchasing at increasingly higher prices, bringing your average cost higher, by virtue of a rising price over time. However, crypto markets have been known to be volatile and the disciplined approach over the long run — buying at lower, and higher prices — would be more beneficial as it removes the emotional component of crypto volatility, and timing the market and resulting in mismatches of selling at a low price, and buying at a high price.
How to start AutoPilot?
Then you can select the amount you would like to buy on a consistent basis and the desired frequency — Daily, Weekly, and Monthly.
In order to activate the AutoPilot feature, please ensure your Coinberry account is funded up to the amount you would like to ultimately buy (if you want to buy $1000 each month, you should ideally fund your account with $12,000 annually — to account for the $1000 a month AutoPilot option to draw down from, or $50 per month, you would fund $600 annually) and top up when the account runs low.