BeInCrypto Video News Show: Average Dollar Costs

In this episode of BeInCrypto’s video news show, host Juliet Lima examines the fundamental dollar cost averaging (DCA) investment strategy.

DCA is a simple and effective approach that even seasoned traders continue to use for large segments of their portfolios.

While the biggest benefit of dollar cost averaging may be that it removes the emotions of investing, it also spreads risk more evenly and allows users to take advantage of downturns.

For many people, it can be difficult to know where to start when it comes to investing. With crypto markets maturing over the past year, many have turned to exchanges to find themselves stuck with the practicalities of how much to invest, what to invest in, and when. If this sounds familiar to you, then Averaging might be worth considering.

Fortunately, DCA is simple. Rather than making large, riskier purchases at times of perceived opportunity, which are amplified by crypto volatility, DCA involves making consistent and manageable purchases over a longer period of time.

Although buying without considering the current price may seem somewhat counter-intuitive, the key here is consistency.

If someone has $1,200 they want to invest in cryptocurrency, with DCA they would simply divide that amount and invest it over time. For example, invest $100 per month for the next 12 years or $50 per month for the next two years.

What is important is to invest the same amount of money in the market at regular intervals and to make this investment regardless of the price.

Advantages and disadvantages of the cost average

While the biggest benefit of dollar cost averaging may be that it removes the emotions of investing, it also spreads risk more evenly and allows users to take advantage of downturns.

However, this consistency and peace of mind comes at the expense of larger price swings, which have become a main draw for many crypto investors.

Ideally, one would make a large cash investment at the start of a bull run. Additionally, as a higher frequency trading strategy, DCA may incur higher trading fees, but these should be mitigated over the longer term.

For those interested, major crypto exchanges such as Coinbase and Binance currently offer an auto-invest option, while others like Cash App, Swan Bitcoin, and Strike only offer auto-buy for Bitcoin.

You can select the amount you want to buy and the frequency.

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