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Dollar-Cost Averaging: Crypto Investing Made Simple

The Dollar-Cost Averaging (DCA) is an investment principle of distributing your risks by spreading your crypto investments over a regular interval.

Posted July 22, 2021
Last updated February 13, 2024

Illustration for dollar cost averaging crypto
Illustration for dollar cost averaging crypto

Want to invest in crypto assets but are not too sure on how to go about it? Well, dollar-cost averaging may be a strategy to consider. Most passive investors find this strategy beneficial, some even went as far as to claim that “Even God couldn’t beat dollar-cost averaging”.

In this article, I’ll walk you through the key pros and cons of dollar-cost averaging and how you can create your very own dollar-cost averaging strategy with Easy Crypto’s auto-buy feature.

What is dollar-cost averaging?

Dollar-cost averaging is the strategy of spreading out your crypto investment purchases; buying at regular intervals and in roughly equal amounts. When it is done properly, your portfolio can reap significant benefits.

This is because dollar-cost averaging “smooths” your purchase prices over a period of time. By doing so, you ensure that you are not dumping all of your money in at a given price or any point in time; just in case you bought it at a high price point.

Dollar-cost averaging can be especially powerful in a time where the market is uncertain – kind of what’s going on now in the crypto space.

This means you may even be buying when other investors are too afraid to buy, so there’s a good chance you’ll be “buying the dips”.

Committing to such a strategy means that whether the market is good or bad, the average price you pay for your investment, in general, helps you to score a pretty good deal.

Jump right in: Get started with our Auto-Buy feature.

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Why bother when you can buy the dip?

Although buying the dip seems logical – that is buying at a bottom price so that one is always investing at a relatively cheap price – this may not necessarily always be the case.

This is because one can never truly know when the market has “bottomed out”, and even so, it is not often we see huge market retracements.

Stonks meme realised into real life.
When you buy the dip, this little man will say “STONKS!” Photo by Gilly on Unsplash.

At the time of press, in mid-July of 2021, the current bearish market would prove challenging to navigate even for the most savvy crypto veterans.

It is during these times that the dollar-cost averaging method would help you stay on track, and not be swayed by the current bearish climate and noise in the market and media.

In the case of cryptocurrencies, the market is relatively young and volatile, and it is almost certainly impossible to time the market. As a result, if you try to time the market, you may end up losing out on buying opportunities, which ends up worse for your investment portfolio.

Further reading: Read our guide on investing in crypto during the bear market.

Why does dollar-cost averaging work?

Dollar-cost averaging provides three key benefits that can result in consistent returns. This is because it helps you to:

  • Avoid mis-timing the market.
  • Take the emotion out of investing.
  • Think longer-term.

Dollar-cost averaging therefore saves you from your psychological biases. Investors, professional or not, are still human, and we are prone to making emotional decisions and market gyrates which render us vulnerable to our fear and greed.

Dollar-cost averaging helps to minimise such errors and mistakes, allowing us to concentrate on the long-term growth of our crypto investments.

As previously mentioned in our tips and tricks for crypto investment, using the beauty of time and compound interest, having a strategy where one adds consistently to their allows one to fully maximise the gains while reducing risks.

While you are not buying all at once when pieces are at the bottom, the same logic goes that you are definitely not buying all at once when prices are at the highest.

The possible drawback

Like all investment strategies, each and every strategy has its own pros and cons, and the same goes for dollar-cost averaging. The main drawback of dollar-cost averaging is that despite doing so, investment returns are still not guaranteed.

A zen rock pile.
Warning: Dollar-cost averaging may give you peace of mind. Photo by Michaela J on Unsplash.

However, the trade-off between risk and return means that one can still anticipate a conservative and modest return.

Dollar-cost averaging using Easy Crypto’s Auto-Buy

With little legwork upfront, you can start to dollar cost average with Easy Crypto’s auto-buy feature. Setting an auto-buy is straightforward!

In fact at Easy Crypto, you have the option to set multiple auto buys. For example, one can perhaps have an auto-buy set on a weekly or fortnightly basis coming on from your paycheque as part of your long-term savings. Or you can set a different auto-buy on a monthly basis for occasions such as Christmas or Birthdays.

To set up an auto-buy, log into your Easy Crypto account and click onto the “Account tab”.

  1. Find the “Auto-Buy” option

    You will be able to see “Auto-Buy” as the first option on your drop-down menu:

    The Auto-Buy option from Easy Crypto to start your dollar-cost averaging strategy

  2. Click onto “Auto-Buy”

    You will then see an option to “Create new order”:

    The option to create new order in Easy Crypto's Auto-Buy option

  3. Add your preferred cryptocurrencies

    Please bear in mind there is a minimum amount for our auto-buy. But, this can be weekly, fortnightly or monthly – it’s up to you!

    Choose your preferred cryptocurrencies in Easy Crypto's Auto-Buy option

  4. You can play around with the components of your auto-buy

    When you are happy with the ‘make-up’ of your auto-buy, you can add the wallet address(es) for your crypto assets. Please copy and paste your address(es) to avoid mistakes. Please also double-check to ensure that the provided address is correct.

    Confirm your cryptocurrency wallet address in Easy Crypto's Auto-Buy feature

  5. Confirm your auto-buy order

    Once you have set up your wallet address, you can go ahead to confirm your auto-buy order. You will then be provided with instructions on “How to pay” for your auto-buy:
    Confirm your payment method to complete the Auto-Buy order

When you click onto the “How to pay” option, you will be provided with our bank account details and a unique reference number.

You may set up an automatic payment from your bank account to fund your auto-buy order. Please check the payment details.

Our auto-buy feature is flexible, and this means you can make changes to your order by clicking on the “Edit” option. You can also increase or decrease your auto-buy amount, or stop this order at any time.

It really is that easy. Click here to create your Auto-Buy order with Easy Crypto.

Is dollar-cost averaging right for you?

With all that said, the big question remains:

Should I use dollar-cost averaging to invest in crypto?

Here’s my take: for those just starting out investing in crypto, dollar-cost averaging will help mitigate the volatility commonly associated with cryptocurrencies.

Over the long run, you’ll average out the highs and lows and emerge more profitable in the long run. And that’s the key takeaway here – use this method if you want to stay invested in the long term.

Screenshot of Easy Crypto Auto Buy order page.
Automate your crypto investments with our auto-buy templates.

Disclaimer: The information and discussions in this article are to be used purely for educational purposes only. It is not to be interpreted as financial advice, please conduct your own research and due diligence before investing.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated February 13, 2024

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