It reduces the risks of buying cryptocurrency on top or lows as well as reducing emotional stress on deciding when to buy or not to buy.
When using the average cost effect, you give the opportunity to be speculative in the market. You lose the ability to buy large amounts of the crypto asset at the “bottom” or at the “top”. Additionally, building up a larger sum can take time, which may not be beneficial in a bear market.
You have to choose a cryptocurrency, the amount in US dollars or euros, the frequency of buying the coin and the total time period. You receive a historical performance calculation for the purchase of the asset with the chosen parameters.
At every purchase you add a certain amount of the asset to your portfolio. The amount fluctuates depending on the asset's price on that specific date. At the end of the graph, respectively today, you can see how the asset has performed during the selected time frame.
The gray line represents your opportunity cost of not purchasing the asset but instead leaving the money without interest e.g. on a bank account. If you do not see the gray line your crypto savings plan has performed better than holding cash. But if you see it, holding cash was the better option on that day. 😉