Bitcoin Forum

Dollar-Cost Averaging (DCA) is a classic investment strategy in which you divide up the total amount you'd like to invest in a particular asset across periodic purchases. You don't care if the price goes up or down; you just buy at regular intervals.

Let's say you have $10,000 you'd like to invest in BTC. Instead of making one lump-sum investment, you spread your purchases across a certain period, say 10 months. This means that every month you will buy $1000 worth of BTC regardless of the price.

What does this do?

1. It helps reduce the impact of volatility (because you won't get tempted to invest more than $10,000 when you see dips). In other words, you avoid the risk of making counter-productive decisions out of fear or greed, such as panic-buying or panic-selling.

2. You may not notice it from your short-term investment activity, but if you zoom out and look at the big picture, you'll see that you have more exposure to dips when you dollar-cost average than when you track for a dip.

3. Let's face it, tracking for a dip is time-consuming and stressful. You could use the time you spend poring over news and charts to manage your other income sources.

However, this strategy only works if the price is generally going up. Like any other strategy, it won't work in a bearish market that has no hope of breaking out.

But at least this way:

1. Your total loss will be smaller.

2. You only lose a portion of the fund you initially intended to invest because you didn't add more in the process.

3. Recovering your losses is also easier if the market is bound to recover.

4. The amount you intended to invest is most likely just a portion of your wealth you can afford to lose, which means you can also afford to wait it out until the market recovers (and not resort to capitulation).

This could have saved or eased the suffering of those who lost their entire life savings on assets that crashed in the recent bear.

Unfortunately while DCA being one of the most effective strategies for non market pros, it's probably the most boring method hence why most people don't want to do it. People get really addicted to the adrenaline rush of getting in and out of positions, not knowing that most of them are just basically gambling because they're doing things blindly.

https://dcabtc.com/

This volatility is something of investors must not be concern upon investing in BTC since the market will always do what it do. The volume is always high when it comes to BTC market. What investors concern is to make a profit every time. He will need to hold for a very long time if he starts DCAing while the price has not yet bottomed. That's an option for the investor.

While you are not yet losing money because of DCAing, just find the right time to buy. So far we still could see people telling us its not yet the bottom price.

Couldn't agree more. But it's also a fact that DCA is for position traders (those who prefer long positions). Definitely not for scalpers, day traders, and swing traders. But ultimately, it's not the technique that would cause you to lose more but taking risks you can't manage and spending more than you can afford. 

It's probably one of the safest methods in investing (in terms of being taken by your impulsive actions) as well as avoiding most of the decision-making due to market conditions. It's basically an investing strategy for someone who doesn't have the time to trade or for someone who doesn't want the stress of trading, just as OP said. It's not exactly something newbie traders would go for though at the start, I myself have lost quite a substantial amount first before even trying it out.

DCA is generally discussed about the stock market and is often the only strategy available to people - adding a set amount every month as they get paid their salary. It helps capture the troughs of the market and also the peaks, which ends up with the best average returns you're likely to get. However it does not really apply to Bitcoin, which is an idle and non-productive asset class. Sure you might have made money from DCA on the way up, but at its current hefty price that could go up or down, you're unlikely to make anything like the fairly stable returns of the stock market. If you're trying to "recover losses" then you're already in a failing position and many people simply don't have the long term commitment that real investing requires.

Been doing this and I can say that it's been effective to me.

As long as I'm in profit, I can dispose and sell some portion at my own will if I need to do so. I've told this strategy to my friends but yeah, it's really boring upon knowing what to do.

It's a strategy for the patient and enthusiasts in the market without thinking of selling as soon as possible. This is the understanding of the investors that does this, they're all long term.

Yes, since the investor would be investing over a certain (long) period of time, they obviously should have the intention of hodling whatever asset it is for the long term. Short term investors are all about going in all at once with a large sum and hope for a pump around that time so they could pull out with their profit, that is a very risky strategy, especially for newcomers who are just investing in an asset for the first time. If one is patient enough, and is ready to stick to their DCA plan religiously, then they would prolly be able to grow something really worthwhile in the long run, without really stressing their finances in the short period, which is the best part of it all.

This is an accumulation investment that gradually builds your money but it is just like any other investment apart from real online trading. It also has its emotional disadvantage when there is a huge bear you might want to be tempted to invest when it is not your stipulated time to push in money, that is the emotion playing fast on your mind. It may also be liking to other businesses because even in physical business arrangement, your investment grows as you increase your capital. It is different from online trading anyway.

DCA is goot if you  are doing it in a bear market, since you will have more coins than buying coins with all your money at the start of bear market, but it's also worse than buying coins with all your money at the bottom of the bear market and then waiting for a new bull market. 

I would say that it's better to buy a large sum and wait for many years - you are only losing money if you are selling coins at a loss, not if the price drops below your entry point. But if DCA helps you sleep better, than go ahead.

Been doing this for quite some time already.
I've been doing it not only in crypto, but also in the stock market, and it's so far the best strategy for me.

The only downside that I'm seeing with this is that your potential profit will be smaller, especially when the market is going up since you are buying as the market is going higher but aside from that, I think there isn't any problem with it and for me, it's safer than just buying a single crypto or stock at once (lump sum). It's kinda boring in a way since many people right now wants instant gratification already, but DCA is working especially if you are young.

I disagree.  DCA works even during bull runs.  You increase your average cost, but your average cost will not be the All Time High unlike many investors who got screwed temporarily in 2017 by investing at around All Time High price.

It works during any run, whether bull or bear.  I have DCA'd before myself and it works wonders.  Bearish?  You get more Bitcoin.  Bullish?  You get less Bitcoin but the purchases you made during bear runs are now compensating.

On the other hand, I tried purchasing a large sum and waiting for many years.  Since you mostly hear about assets when they either crash to the underground (LUNA) or when they pump crazily (SHIB), you get to want to buy only during hype and sell only during extreme FUD.  For the average investor it is very hard to pick the right choices at the right time.  Therefore, by DCA'ing, you make sure you buy any time no matter the market conditions.

DCA'ing an asset brutally crashing is also so much more helpful than purchasing a big chunk of coins at once.  Your average gets significantly lower and the coin needs to heal much less before you are starting to earn a profit than it would need to heal if you had purchased a big chunk at the higher highs.

Of course.  Not financial advice.  This is my personal experience.

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Regards,
PrivacyG

I haven't heard of this strategy, I believe, but I fail to grasp how this is better than other things. It's kind of time diversification, but it still depends on a year when you do it. If it's a bull market that's going on for months, the price is growing, and you keep pouring a thousand after a thousand into Bitcoin. Then the price, say, starts going down, and you're still doing it. Why isn't it better to wait till the price is quite down (say, at least -30% from the ATH), and invest $10k then? It would mean buying more BTC than if a person buys when the price is high.

Well yea, DCA is for long-term investing and was never meant for trading in the first place. Not to mistaken DCA from doing TWAP (time-weighted average price).

Yeah and that helps for larger accumulation.


Like the above such kind of investment is profitable when you buy cheap and that is during the bear as we are witnessing in the market as for now. If you put money in a bullish season you of course get lesser quantity of bitcoin. I think is a better strategy for hodling bitcoin from the bear to bull, a longtime plan.

Better on the sense on catching/patching up your losses specially if you do make yourself bought on the peak and since you are gradually buying on cheaper price after your entry point then you are really that

closing that gap but DCA isnt something that a relevant thing to be done if you do really go for long term target or goal because you can really able to bare in speaking with volatility.

DCA is a good strategy but this is something that not fits all yet this would surely involved a bigger investment or finances or money on your pocket in doing so.  :)

I've tried to be that one for short term but it doesn't work perfectly for me. I make money from trading short term but unlike the others that I've seen.

They're making huge money after pulling it off in the market even it's just for the short term. I admire them for having that effective strategy in the short term.

But, I know what works for me better and that's holding for long term and if I've got some spare money, I'll do DCA.

I agree. And make no mistake, DCA is a great investment approach people could adopt. It is recommended. However, this won't really pacify those who have panicked and those who have fallen to their fear and eventually decided to sell what they have. In other words, this only applies to those who know what they are into. To those who do not, the various kinds of investment approach do not matter, especially when faced with a severe bear market.

So what will really ease their suffering and save them from making worse decisions is education and awareness.

I'm gonna go old school and just say word up to that, buddy.  I've never looked into the advantages of DCA investing, but I've done it with retirement accounts in the past where money was taken out of my paycheck every week. 

For the crypto market, though?  I don't think a lot of folks on this forum do it, either because they don't have the discipline or simply don't have enough money on a regular basis to plow into bitcoin or whatever altcoin they're into.  I mean just take a look at all the obviously desperate bounty hunters there are, working for shitty tokens that might be worth nothing (assuming they even receive them at the end of the bounty period).  I have a feeling they're trying to earn crypto to buy basic need items and probably aren't building a crypto stash.

With respect to this most recent crash, I'd point out that dollar-cost-averaging would only protect you if your average purchase price was less than $30k or so, and it won't always prevent you from "losing more".  You can actually lose everything depending on what you're investing in.

That is what makes those strategies so hard to implement, the psychological aspect is often overlooked when people are learning how to trade, however it is a critical aspect, if you cannot master your emotions then you are bound to not follow the strategy that you have set for yourself and make costly mistakes from which it is really difficult to recover, also DCA is a strategy that does not react to the markets and instead makes you to invest in them at fixed intervals, which runs contrary to what most people are used to do in the markets.

. . . and how many of you think that they are really using it? Do we using it on the regular basis. The DCA is not even practiced on regular basis and only considered by the experienced. I mean what would I do as general average trader while using bitcoin and transactions to the dollar? Why would I go on research on the same if Im just able to convert coins quickly whenever I need them. I dont even bother at looking the dollar conversion to my local currency because if I need the money then surely I need it, I wont be stopping for the prices to move to good terms right?


Yeah, that explains. For traders.
As far as bitcoin is considered most of the users fall under general transactors whose using the bitcoin to trnasfer money here and there. Play games, gamble it, store it etc.

I mean yea, the "DCA gud" narrative obviously doesn't work for literally everything as it will also depend on what asset you're actually buying. But then again — assuming that the asset you're buying is actually decent, you're likely to win given a long enough time frame (probably 5 years minimum to be safe).

As for the so-called "bounty hunters", yea I wouldn't really put them under the "investor" umbrella in the first place.

Brother trust me in a bear market all of your liquidity will be drained if you do DCA. I know this because I have done it. Every month price of my project making new lower low and I can not do anything but put more money into it. Actually, I am trapped with those projects. So it will be best to wait for most of the major coins to dump over 80% from their ATH after a bull season and then start accumulating coins.

Say you actually DCA for some time, but don't want to do it in a bear market. How do you know where the bear market starts and where it ends? Take the last 12 months. The price went to 60k and down to 30k. Was that a bear market, a place where you should stop DCA? Actually no, although we were down 50%. Then we went up again and down to 40k. Was that the beginning of a bear market? Many traders argue that it was, but we were still higher than the lows of 2021, where buying was actually the right thing to do.

My opinion is that it's so hard to predict whether it's a bear or bull market with bitcoin that it's better to either DCA or wait for 50% drops to start buying and then either hold as long as you can or start slowly selling when you're up 50% and keep going the same exact way that you'd accumulate with the DCA method, just the other way round, selling 10% of your holdings every month until it crashes again.

I have already mentioned in my first post how to identify one. In a bear market price of most coins will gradually create a lower low. Yes, you could see some recovery after every crash but it will crash repeatedly. This is how a bear market reacts. It is not that hard to identify a bull or bear market and in every bear market, most of the coin prices went below 80% of their ATH. You can check that by yourself.

So, according to you, was the May and June 2021 a bear market? We had a low of 45k on May 12, 42k May 15, 30k May 18, 28k Jun 20 = gradual lower lows.

I don't agree with you, it's really hard to identify a bull or a bear market in cryptocurrencies. Most people identify it long after the fact.

If we are at these 80% bear market crash predictions, what are your thoughts about bull market highs? I agree that we had these ~80% pullbacks in 2014 and 2018, but those bull markets were also much different with over 1000% gains. This time, for the first time in history, the bull market (at least that's what people call it) ended with the smallest gains ever of around 350%, which is barely a third of what the previous bull markets were able to deliver.
I feel like we should compare highs and lows of the cycle instead of focusing on one side of the story.

This kind of Model can only work with bitcoin, if you try to do dollar cost average with altcoins, you will bleed the hell out of your capital and you know what happens to altcoins in every bear market, almost all of them don't make it back to the next bull run and as a result, you get stuck with the worthless token.
I use to hear they say millionaires are always made in a bear market, do that with bitcoin and continue to stack some bitcoins the moment it starts doing lower high on the weekly time frame, you will enjoy the time it goes out of the bear market and if you do it properly, you should be even with your investment before the new bull run begins.

DCA makes the basic assumption that the asset's value will rise over the long term. So, you invest regularly whether the price is higher or lower, believing that eventually it will go higher. DCA reduces your urge to speculate, which has been shown to give worse results.


It isn't better because the price might rise instead of fall. You are making the assumption that you can somehow predict the price movements. The reason that you invest the same amount at regular intervals is that you don't really know where the price is going in the short term, but you believe the price will be higher in the long term.


DCA is a long term investment strategy. If you know that an altcoin is going down in the long term, you shouldn't invest in it for the long term.


Anyone can identify a bull or bear market afterward, but you can't know how long it will last ahead of time.

"In every bear market, most of the coin prices went below 80% of their ATH" is not a very good indicator. You miss out on coins that don't lose 80% and many coins that lose 80% never recover.

In a bull market, it is the opposite. Most of the projects made multiple X within a month. This time we saw the ROI is lower because the market becomes bigger. Do not look at the ROI instead look at the amount of volume or money inflow in this bull season compare to the previous one. You will be this number is getting higher in every bull season. I am also sure in the next bull season we will see multiple X cash inflow than this season but the ROI will be smaller than this season. This is the nature of crypto. The more mature the market will become the less volatile it would be.

This is a good point. If we assume that it's true and market becomes more mature with more inflows every time but lower volatility, why do you also think that over 80% drops will continue? These two assumptions contradict each other.
Also, the more mature the market the better for people who DCA because the spread is going to be smaller and so will the risk.

If you are investing during the bear market you can easily buy everything in a lump sum by taking advantage of the cheap price. I think dca is most effective when you invested during the bull market, those who bought high last year have the opportunity to dca now that the price is down. But some investors don't usually dca when price is down because they feel frustrated with the price and would rather sell and leave than dca. This is a great strategy but not everyone will apply it.

I don't think this is necessarily the case.  Most of my clients dollar cost average by default, as with retirement plans you've normally got money coming in to your plan from your work paycheck every two weeks, so by nature they are dollar cost averaging and not even knowing it.  Now if we are talking about outside of your normal retirement plan investing, then I would probably agree with you.  But I think most of those times are simply people placing trades when they have the money to do so versus trying to time things.

If you do let your emotions control you then you would really be ending up on a panic selling kind of decision where you wont tend to make use of those DCA strategy which is really something that do really patch up
on what you had lost when you did invest on a bull market but somewhat not all does have the finances on doing so thats why they dont really have any choice but to panic sell or cut loss then buy into the current
price and hope that they would make profits on the time the market recovers which i could say a totally absurd kind of decision.

maybe this method is what i need. i am new to crypto trading. I will learn more about this DCA method.
like this can minimize mental pressure when prices fall. because it will open up new opportunities to buy again at lower prices.

In a bear market to secure your portfolio bitcoin is the perfect choice but not all altcoins will turn into shitcoins in a bear market. During the bear market, most altcoins will drop a lot sometimes 80%, 90% of the value so this will be an opportunity for us to own them cheaply but make sure to always do your research before deciding to buy and accept the risks it can bring to us. The DCA strategy is really an effective pattern when a bear market occurs. DCA will help us accumulate assets cheaply and just patiently hold on to the bull season and our profits will increase significantly.

This is basically what I am doing, my salary is monthly hence why I put money in my crypto accounts once a month, and I have been doing that for a while and it is a great feeling, but the reality is that it is not going to be something special, I am not going to be able to retire and be super rich by the time I am 60 because of 2 reasons.

First of all, the economy is getting so bad that, I would be shocked if I do not cash out all of my money eventually, it is quite possible that I would be selling it all and paying some debts or try to survive because our economy could crash any moment and I would have to pay x10 more for food very soon. Secondly, I am not putting "that" much money in it.

As long you could able to take the risk and invest on the money that you could afford to lose then I don't see anything bad with the decisions that had been made.We do have different perspective in life and towards on things that we are involved with and as for DCA then if your finances do permits you then this is something which is preferable but not all does have the capital on doing so thats why most of the time we do really miss out good opportunity on making profits on the time of reversal.

I basically did DCA from very low amount until 2020 or so and that allowed me to drop the average from 2017. I had some from 15k+ range, and dropped that to 5k and then even increased it to 10-11k range as well by DCA but gained a lot more amount. This allowed me to be in profit even when it was 25-26k recently, and definitely a lot more in profit when it was 60k+ as well. I am not going to sell unless I absolutely need to.

and needs a lot of patience. For a person like me who is very impulsive this DCA is not successful.
DCA is good for those who have patience - who can wait and invest. I need to do some exercises to be calm and then start investing.

If there is a specific plan, it does not matter whether or not DCA is so important, because each person will have a different approach to assessing the individual financial markets they study. As I am passionate about feelings, if background knowledge is required to talk about an investment strategy that will always bring profits in the future, it is clearly possible for the really wealthy and even for those who can balance income expenditure as well as profitable investment. And over time, if we experience more and correct the mistakes we made, profits will certainly come as a matter of course.

If people knew how well DCA could make you profit as well, they would have started doing that a long time ago. I personally believe that we should not be really shocked with the current situation, all in all I have to say that the best thing we could do right now would be to accumulate as much as we can.

DCA is basically dollar cost averaging, which means that when you buy at 30k, you buy at 25k too, not 35k, but I do that too. Doesn't matter where it is, I keep on buying more and more and more whenever I get money. This results with me never getting all in at single price, I get in from multiple places and that’s how I make my money. That’s how we should approach it as well.

Something new I have learned today. Added it in my list and I am surely going to search how to do it.
So much good stuff you learn through forum - I a happy I am a member too.

And that is when DCA really shines, if you can use the strategy for long enough even if you got in at the beginning at a bad price and you bought expensive coins then as time passes and we have to face a bear market this gives you the opportunity to lower your average price at which you bought your coins by a significant margin, however most people never think about doing something like this and instead they sell their coins under those conditions, something that is a really bad idea but which a lot of newbies end up doing due to their inexperience.

DCA indeed prevents you from losing more but it also prevents you from making more. Throwinig lump sum money might make you more money but you need to be able to time the markets. That's where DCA'ing really shine. If you DCA for a long time, you get the average price of that time line. It will minimize both your losses and gains. TA gurus usually go all in and all out because they know when to make these moves but average Joe's should stick with DCA'ing.

How many people are really aware of the DCA calculator?
Although one can make calculation but does it implies every where?

Was your dollar cost average monthly buy or weekly? it turned out that when you DCA, you will end up with much in daily buy but if you have the opportunity to do that on monthly and buy more more especially when it dipped in price, you will found out that the monthly is more favorable.
I learnt that the bear market is always long, this is the perfect time to establish that buying habit but unfortunately, people fear this bear market like they do fear bed bugs, they don't know that this opportunity will never returned again, just like buyers who are waiting btc to come down to $10k.

Monthly or weekly might be outstretched considering that the price condition do actively changes most of the time which means losing chances on getting in into those cheaper price
is something that be done on a hurry and thats why its really important that you do always have back up funds for situations or conditions like this on where you could able to
accumulate if you wanted to but of course not all would be minding about this  stuff since they do come after for long term aspect which means
whatever the timeframe on the time they would make out purchase wouldnt matter much.

I tried to do some calculations today through DCA but I am not sure how to do it?
Can anyone help me with it. I am sorry in advance if my question looks silly to you. Looking fwd for your reply - thank you!

https://www.youtube.com/watch?v=bY8Eu9D9bzA
https://www.youtube.com/watch?v=hQinhrtPLQc

Hope this one helps and you could find out other sources which would be relevant or something good in terms of
DCA definition or on how its been done. Its up to you whether you would be applying this or not.Good luck!

Good links shared. Thank you for sharing the links.
DCA methods are really good for making the calculations. The one who has shared them have done justice to the forum.