Value Averaging (VA) is an alternative investment strategy that investors have been using in the stock market for years. It tends to work better for investments that are highly volatile in the short term, so it could be a good fit for cryptocurrencies. The idea behind VA is to:
Buy more coins when they are cheap (at good value).
Buy fewer coins when they are expensive (at worse value).
Sell some coins when they are really expensive (at terrible value).
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.
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. Because the price is so low, you end up purchasing more Bitcoin for that $150 by taking advantage of the sale.
Now suppose that by the time the third month starts, the price of Bitcoin has gone up a bit. 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.
By the beginning of the fourth month, the price of Bitcoin is up significantly. 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.