Dollar Cost Averaging (DCA) in Crypto

1. What is Dollar Cost Averaging (DCA)?

• What it is: DCA means putting a set amount of money into a crypto regularly, like every week or month, no matter if prices are up or down.

• How it works: For example, if you want to invest $10,000 in a year, you could split it into about $833 a month or $192 a week. You pick what fits your budget.

• Why do it: It lets you buy at different prices, so you end up with an average price over time. This lowers the chance of buying everything at a super high price.

• Big benefit: You don’t have to figure out the perfect time to buy, and it stops you from making rash choices or stressing about missing a big price jump.

2. DCA vs. Investing All at Once

• What’s the difference:

  • DCA: You spread your money over time, which evens out price swings but might miss the lowest prices early on.

  • All at Once (Lump Sum): You put all your money in one go. If you buy when prices are low, you can make more, but if prices are high, you might lose big.

• Example:

  • DCA: Putting $500 a month into Bitcoin for a few months gave you 0.1642 Bitcoin, worth $2,504 by September.

  • All at Once: Investing $2,500 in Bitcoin in May (when it was $15,000) beat DCA by September. But buying in July (at a higher price) did worse.

• Key takeaway: Investing all at once can win big if you buy cheap early, but it’s risky if you pick a bad time. DCA is safer, especially in crypto’s crazy market.

3. How to Do DCA in Crypto

• Steps:

  1. Pick an amount: Choose how much to invest each time, like $100 a week.

  2. Set a schedule: Decide to invest every week or month and stick to it.

  3. Find a platform: Use a crypto exchange like Binance to do it by hand or set it to auto-buy.

  4. Keep going: Invest the same amount every time, whether prices are high or low.

• Using Binance Auto-Invest:

  • You can set it to buy $100 of Bitcoin every week using a stablecoin like BUSD.

  • Cool perk: Money waiting to be invested can earn about 6% interest (at the time of the video) in Binance’s savings account.

  • Example: Set it to buy $100 of Bitcoin every Monday. Your extra cash earns interest until it’s used.

• Why it’s great: Auto-investing makes it simple, keeps you on track, and stops you from buying on a whim.

4. Importance of Choosing the Right Crypto

• Why it matters: DCA works best if you pick a crypto that’s likely to grow over time.

• Examples:

  • Good choice: Bitcoin has climbed a lot over the years, acting like a major market leader, so it’s usually a solid pick for DCA.

  • Bad choice: Terra (LUNA) crashed hard in 2022 and never really bounced back, so using DCA on it would’ve meant losing money, like pouring cash into a bad bet.

• Lesson: Choose strong cryptos with a bright future to make DCA pay off and avoid wasting your money.

5. How Well Does DCA Work?

• What’s happened before:

  • Good times (Bull Markets): Using DCA on Bitcoin, Ethereum, or BNB for five years made good profits because prices soared.

  • Tough times (Bear Markets): In 2022 (when the video was made), DCA over the past year lost money since you bought some at higher prices earlier. But losses were only 33%, way less than Bitcoin’s 65-70% drop from its peak.

• Compared to All at Once:

  • Investing everything at the lowest price beats DCA if the crypto keeps rising, since DCA buys at higher prices over time.

  • But DCA saves you from bigger losses if you’d bought everything at a crazy high price.

• Like the Stock Market: Bitcoin acts a bit like the S&P 500 stock index (which grows 8-10% a year with dividends). Data shows investing all at once at a low price does better, but DCA is an easy, no-worry way to stay invested.

6. Timing the Market

• Why it’s tough:

  • Perfect timing: Buying at the cheapest price each year gives the best results, but almost nobody can do that consistently.

  • All at Once: In markets that go up, putting all your money in early beats DCA because prices usually climb later.

• Why DCA helps: It lets you invest without trying to predict the market, so you still gain from long-term growth.

• Even bad timing is fine: Buying at the wrong time in growing assets like Bitcoin or stocks is still better than not investing at all if you hold on long enough.

7. Dealing with Crypto’s Wild Swings

• Bitcoin’s rollercoaster: Unlike stocks, Bitcoin can crash 70% or more in rough times, making it risky to invest all at once.

• Worst time to buy: At the peak of a big price boom, since a drop often comes next.

• Best times to buy:

  • Early on: Get in early and hold for a long time to make the most.

  • During crashes: Prices are lower, so you get more crypto for your money.

• DCA in wild markets: It balances your buying prices, so you don’t end up paying too much at the worst times. It’s great for crypto’s ups and downs.

8. DCA When Prices Are Low

• Why it’s smart: Buying regularly when prices are down (bear markets) gets you cheaper crypto, setting you up for bigger wins when prices climb again.

• What the data says:

  • Bitcoin has big drops every few years, and those are awesome times to buy cheap.

  • Buying early at low prices gives the best percentage gains. DCA during low times builds up your portfolio’s size.

• Real life: Nobody can guess the exact bottom, so DCA during down times (3-12 months) evens out your costs and beats buying at high prices.

9. Tips for People Investing for a While

• How long to invest: If you keep at it for 4 years or more, the market usually grows enough to give you solid returns, even with some bumps along the way.

• Focus on low prices: Put more money in during bear markets to buy cheap. This boosts your profits and lowers your average cost.

• Pick the right crypto: Choosing something strong like Bitcoin, which acts like a market leader, matters more than whether you use DCA or invest all at once.

• DCA fits most people: If you get a regular paycheck, you’re probably already doing DCA by investing a bit each week or month.

• Crypto’s wild side: Bitcoin swings more than stocks like the S&P 500, so DCA is a safer way to handle those big changes.

• Growing your money: Investing all at once at a low price is best for big wins, but steady DCA—especially when prices are low—keeps risks low and builds your portfolio over time.

Important Notice:

 This report is for informational purposes only and reflects the opinions of BMERIN Research & Investment as of the date of publication. It is not intended as investment advice or a recommendation to buy or sell any financial product. Market conditions may change and BMERIN assumes no responsibility to update this material. Always consult your financial advisor before making investment decisions.