Bitcoin & cost averaging: What if… you started a savings plan in 2024?

Bitcoin 2024 (TL;DR) 

Bitcoin’s performance in 2024 has been shaped by several key factors, including global economic trends, regulatory developments and a bullish trend following the 2024 US election. On the whole, month-by-month price movements have showcased both significant gains and periods of consolidation.

• January-March: A steady recovery from 2023 lows, with gradual price increases stemming from Spot Bitcoin ETF approval. 

• April-June: The Bitcoin Halving builds bullish momentum as adoption grows and sentiment improves.  

• July-September: Market corrections and consolidation after profit-taking from a positive post-halving performance, geopolitical instability, and macroeconomic challenges. 

• October-December: Renewed interest in Bitcoin following the 2024 US election, institutional backing, and increased optimism among investors led to Bitcoin reaching all-time highs. 

The cost-averaging effect 

Amidst the volatility of the crypto market, cost averaging (also known as dollar cost averaging) stands out as an effective strategy to mitigate risk while providing consistent exposure to an asset. This can be particularly useful for assets like Bitcoin, where timing the market can be challenging - but how does it work? 

• Consistent investment: Cost averaging is an investment strategy where you regularly invest a fixed amount into an asset, regardless of price.

• Shield against volatility: This strategy helps to smooth out the impact of market volatility by purchasing more when prices are low and less when prices are high. Over time, this approach lowers the average cost per unit, allowing investors to buy the asset at a more favourable overall price.

• Slow and steady: For example, investing €100 monthly into Bitcoin allows you to steadily accumulate the asset without worrying about short-term price fluctuations.

What if you started a savings plan in 2024?

Let’s explore a hypothetical scenario of investing €50 weekly into Bitcoin at the start of each month in 2024. This regular investment would build a significant portfolio over time, reflecting the cumulative impact of cost averaging.

Here’s how we’ll break it down:

• Weekly investment of €50 

• Average Bitcoin price during the period of investment

• Total Bitcoin purchased 

• Total investment in Euros 

• Portfolio value by the end of the year 

Monthly breakdown 

Q1 - January 2024

• Weekly investment: €50 

• Average Bitcoin price: €60,143.07

• Total Bitcoin purchased: 0.043826 BTC 

• Total investment: €2,450

• Portfolio value: €4,011.77

Q2 - April 2024

• Weekly investment: €50  

• Average Bitcoin price: €64,365.38

• Total Bitcoin purchased: 0.033825 BTC  

• Total investment: € 2,050

• Portfolio value: €3,096.31 

Q3 - July 2024

• Weekly investment: €50

• Average Bitcoin price: €65,518.21

• Total Bitcoin purchased: 0.023099 BTC

• Total investment: €1,400

• Portfolio value: €2,114.47

Q4 - October 2024

• Weekly investment: €50  

• Average Bitcoin price: €72,189.11

• Total Bitcoin purchased: 0.011117 BTC

• Total investment: €700

• Portfolio value: €1,017.65

What if you started a savings plan in the bear market?  

Though it can be tough to see the light at the end of the tunnel during the dark days of a bear market, small and regular investments can be a useful way to navigate these difficult times. For example, if you started investing €50 every week into Bitcoin at the start of each month since March 2022, this consistent investment would have led to a purchase amount of €7.3k and 0.24399BTC, generating a whopping €22.3k!    

What have we learned? 

Cost averaging has proven to be a beneficial strategy for navigating the fluctuations of the crypto market. As we’ve seen above, steady and consistent investments in a somewhat volatile asset like Bitcoin can yield significant returns. 

Here are some key things to remember:   

• Long-term vision: Cost averaging highlights the importance of discipline and patience when building a crypto portfolio.

• Consistency pays off: Steady investments reduce the emotional stress and help to avoid mistiming the market.

• Volatility can work in your favour: Cost averaging can help you buy more when prices dip, maximising long-term growth.

• It’s never too late: Don’t dwell on missed opportunities. Implementing the cost-averaging strategy today can set you on a path of steady, consistent gains.  

Whether you’re new to investing or looking to refine your existing strategy, cost averaging could be the key to unlocking long-term growth.

Explore Bitpanda’s savings plan options and start strengthening your portfolio today.

Disclaimer 

This article is distributed for informational purposes, and it is not to be construed as an offer or recommendation. It does not constitute and cannot replace investment advice.

Bitpanda does not make any representations or warranties as to the accuracy and completeness of any information contained herein. 

Investing carries risks. You could lose all the money you invest.