Dollar Cost Averaging (DCA) Bitcoin: Here’s why it works

With Bitcoin reaching ATH (All Time High) almost every week, do you find it difficult to get invested because you are worried that the price might fall the moment you buy it? Here is one strategy that I personally use to not let emotions hinder my investments.

What is DCA (Dollar Cost Averaging) Bitcoin?

Dollar cost averaging is a strategy, where you invest a fixed amount of money at regular intervals e.g. every month, regardless of the market condition, over a period of time. I use this strategy in stocks investment all the time.

DCA Bitcoin is pretty much the same thing. Setup a fixed amount of money to buy Bitcoin at regular intervals.

Why DCA Bitcoin?

source: tradingview.com

From the chart above, Bitcoin is a very volatile investment. E.g. it peaked at $19,870 in Dec 2017, only to fall to a low of $3,388 in Dec 2018. Imagine if you have bought Bitcoin at its peak in Dec 2017, only to watch it drop to that low the next year. Having to go through that roller coaster ride was no fun.

Here’s why DCA is better suited for a volatile investment.

In this example, let’s say that Bob is a very unlucky guy. He buys $100 worth of bitcoin every month. And he always buys at the highest price for the month. So at the end of December 2020 he would have bought 0.41963264 BTC with $3,700.

BTC is worth $33,710 (as of 06/01/2021). This is how much value in Bitcoin Bob would have now:
0.41963264 x $33,710 = $14,145.82. That’s a 382.32% increase!

DCA Bitcoin

DCA takes the emotion out of investing in Bitcoin. You just set up a recurring purchase for a period of time, just forget it.

That said, this is not a strategy for trading Bitcoin. It is more for HODLers who believe that Bitcoin is here to stay.

How can you start DCA on Bitcoin?

If you are someone who has been on the sideline for a while, and is always wondering when is the best time to buy into Bitcoin, then maybe DCA-ing on Bitcoin is something you can consider.

You can setup a recurring purchase and forget about it. I know if I have to execute the purchase manually, I would have ended up not doing anything because it’s always the price is too high, I should wait, or the price might go lower, I should wait.

I personally use Crypto.com App to automate my purchase. You have to transfer an initial amount of USDC to be used for the purchase.

By the way, if you don’t already have a Crypto.com card, you can use this referral link https://crypto.com/app/pprss4c66a to sign up for Crypto.com and we both get $25 USD when you stake for a Ruby card and above.

The frequency options available are: Weekly, Bi-Weekly and Monthly. Personally, I like to use the weekly option. Because crypto changes happens very fast. You can be at all time low this month, and reach all time high by next month. So buying every week allows me to capture the movements more frequently.

You can follow the guide below on how to set up a recurring buy.

Conclusion

DCA Bitcoin is a a slow and steady strategy to buy into Bitcoin. You buy when the price is high, you buy when the price is low. You just buy at regular intervals, and not let emotions get the better of you. You will be able to accumulate a nice amount of Bitcoin at an average price if you do it consistently long enough.

Disclaimer: As always, there is a risk when investing in Bitcoin. Only invest if you understand or can afford to lose the money.

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6 thoughts on “Dollar Cost Averaging (DCA) Bitcoin: Here’s why it works”

  1. Suz, for this repeat trade to happen, need to deposit USD first right?
    eg, deposit 1k, then every month 100 trade (repeat mode)
    this is not auto deduction from our bank.

    Reply

      • thanks Suz, from your experience, in generally, does blockfi give better rates buying BTC than say , Gemini?

        Reply

        • If you use Gemini Active trader view, the fee ranges between 0.25%-0.35 (active trader fees)
          If you use the basic view where you transact in SGD, any amount above $250 is 1.49% fee. (Web fee)
          Whereas in Blockfi, the trading price you see is usually +/-1% of the exchange price.
          But if you are using it for recurring trade, I would just stick with Blockfi, so you can just set and forget.
          If you are thinking of buying a large amount, maybe can consider crypto exchange like binance.com

          Reply

          • i like your strategy…

            playing with the Gemini app, it seems they have the recurring trade feature too. (similar to blockfi)
            do you know if using the app, is that consider as using active trader? (i have already activated the active trader on the desktop, but not sure if its also reflected in the app) – trading with USD, if it helps

          • Yea,i did noticed they have recurring buy function, but it seems to be only for the basic view. When i switch to the active trader view, i don’t see the recurring function anywhere.
            So I’m not entirely sure as I have not used recurring buys on Gemini.

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