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How to Use Dollar-Cost Averaging in Cryptocurrencies

I have been fascinated by crypto for a long time now, and I enjoy sharing what I have learned about it on ToughNickel.

Prices don't keep going up non-stop. With DCA, you can automatically buy more while the price is down.

Prices don't keep going up non-stop. With DCA, you can automatically buy more while the price is down.

What Is Dollar-Cost Averaging (DCA)?

Dollar-Cost Averaging (or DCA for short) is an investment strategy in which an individual periodically invests the same amount of money into an asset over time. Both institutions and retail investors use this strategy.

The advantage of this strategy is that you can avoid accidentally buying at the absolute peak and instead average down your cost little-by-little with each short downturn in price. Also, if you don't have much money you can slowly grow your investment instead of having to accumulate cash that doesn't gain interest first.

Of course, you would stand to make the most money by buying as much as you can while the price is at the bottom and then selling all of it while it’s at its peak, but unfortunately, you cannot accurately time the market. If you think that the price will go up in the next few years, then you can take advantage of temporary downturns by frequently buying more.

This periodic investment can be automated with a savings plan, so you can forget about it and keep passively investing. This investment strategy is very often used for stocks, funds, and ETFs, but you can also use it for investments in cryptocurrencies.

With DCA, you can slowly grow the amount of money you have invested.

With DCA, you can slowly grow the amount of money you have invested.

How Much Money Would You Have Made if You Invested $10 in Bitcoin EWeek?

After the Bitcoin crash in 2018, the entire crypto world entered a bear market that didn't stop until mid-2020. During this time, Bitcoin that was once worth $20K fell to only $3K. However, a subsequent bull market allowed BTC to reach a value of more than $60K. If you not only held your BTC during the bear market but also used the opportunity to buy more BTC, then you could have made insane gains.

If you invested just $10 per week in Bitcoin beginning in April 2017, then you would have had more than $22K in Bitcoin as of March 2021 despite only having invested about $2K over the years. This is more than a 900% gain in only four years. You can calculate here how much you could have gained depending on how much you invested and how frequently.

By investing $10 in Bitcoin every week beginning in April 2017, you could have turned $2000 into $22,000 in just four years.

By investing $10 in Bitcoin every week beginning in April 2017, you could have turned $2000 into $22,000 in just four years.

How to Automate Periodic Investments Using Coinbase

Coinbase is one of the most popular cryptocurrency exchanges in the world, and it had its IPO in 2021. Most new investors start their journey there. Coinbase offers automatic DCA, so setting up a recurring purchase on their exchange is very easy.

Coinbase lets you choose whether you want your investment to repeat daily, weekly, bi-weekly, or monthly. Currently, they reward their users with $10 cash back for their fourth and eighth repeated purchases of over $50.

Of course, Bitcoin isn't the only cryptocurrency that you can invest in with a DCA strategy. Coinbase offers many different coins and tokens including Ethereum, Litecoin, Chainlink, and many more.

Alternative Exchanges With DCA Services

While Coinbase is easy to use, it is notorious for high fees, so it is good for starting your crypto journey, but you may want to try out other exchanges after doing some research.

Of course, Coinbase isn't the only exchange with a DCA tool. There are plenty, and many offer crypto that CB doesn't. Swanbitcoin, Bitpanda, CashApp, and Gemini all offer repeated purchases. They all offer different cryptocurrencies and have different fees.

CashApp and Swanbitcoin both offer free deposits and free withdrawals with purchases at market rate.

Gemini is user-friendly and has lower fees than Coinbase, and they also give you the option to earn up to 7% for your crypto.

Bitpanda is another exchange for DCA. They are a bit expensive, but if you pay the fees with their own token (called BEST), then you get a 25% discount.

Coinbase doesn't offer every cryptocurrency. If you want to invest in a specific coin that CB doesn't have, then you can use a different exchange.

Coinbase doesn't offer every cryptocurrency. If you want to invest in a specific coin that CB doesn't have, then you can use a different exchange.

DCA Is a Good Passive Investment Strategy

Dollar-cost averaging is a great way to passively invest in an asset. Just like with stocks, you cannot perfectly time the market in the crypto world, but there is no need to do that when you invest periodically.

If you have faith in your investment and belief that it will grow in value over next few years, then you can use DCA to simply grow your investment instead of frantically checking the market every few minutes to see if it’s a good time to buy.

If you want to start investing in Bitcoin in an easy and passive way, then DCA may be the best strategy for you.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2021 Krypton Currency

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