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?

[Update from BlockFi 14 Jul 2021]
BlockFi will no longer allow trading between assets on BlockFi Interest Account in Singapore. This means that the below method will not work if you reside in Singapore. We saw similar thing happened to Hodlnault where the swapping function is disabled for Singapore users. I’m guessing this must be something to do with MAS regulation.

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.

I personally use BlockFi to setup recurring purchase of Bitcoin. 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.

On BlockFi, under the Trade options, there is a Repeat Trade button. This is where you can setup a recurring trade to buy BTC automatically. The frequency options available in BlockFi are:

  • Every day
  • Every week
  • Every 1st of the month
  • Every 15th of the month

And that’s it. You can set it and forget about it.

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.

If you are interested in opening a BlockFi account, you can sign up via this referral link. You will get USD$10 in BTC when you deposit USD$100 or more into your BlockFi Interest account.

For Singapore based readers, find out on how to deposit USD to your BlockFi account here.

Other Crypto articles you might be interested in:

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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