To HODL Or Not To HODL? Value Averaging Crypto Investments: Expert Take

If there's one thing cryptocurrency investors have learnt this winter: it's that sometimes it pays to take profits, which can then potentially be used to buy back into the market later when prices are lower.

What is Value Averaging?Value Averaging is an alternative investment strategy that investors have been using in the stock market for years.

The overall result of this is that investors lower the average prices at which they buy coins and raise the average prices at which they sell them.

VA case study:Say you have $100 worth of Bitcoin today and you want that value to increase each month going forward in increments of $100. By the time next month comes around, the price of Bitcoin has been cut in half - meaning your starting $100 investment is now worth $50. To get the value of your investment up to $200 in the second month, you must now make up the difference by buying $150 worth of Bitcoin.

Your $200 investment is now worth $220. To get that value up to $300 in the third month, you therefore need to invest another $80. In this scenario, you buy less Bitcoin than you did last month during the sale.

Your $300 investment now stands at $500. Since you only need $400 invested in the fourth month, you sell $100 worth of Bitcoin to lock in some profits, which means your investment is now more protected if the price drops next month.

Since you still own some Bitcoin, you would also profit if the price goes up next month instead.The disadvantages of VAAn obvious pitfall of VA is that the price of the investment could keep going down each consecutive month, resulting in larger monthly payments by the investor.

In this case, $1,200 would be the same amount you would have spent over twelve months by using a simple Dollar Cost Averaging strategy, in which you always invest $100 each month regardless of the price of Bitcoin.

Like VA, DCA also averages the prices at which investors buy their investments, however unlike VA, DCA doesn't tell investors when to sell and take profits.

Nobody knows what's going to happen tomorrow, so it's better to be safe than sorry by selling some coins when prices are high and buying more coins when prices are low.