Have a clear understanding of what DCA means

[pawel7777]

DCA works but generally if you are unlucky and buy during the peak or DCA sell during the bottom then it won’t work out best for you.

It’s best to spread it apart, maybe few months apart. That way you aren’t like the El Salvador president who bought bitcoin near the peak and has still a long way until he breaks even. Same with Saylor. Bought large amounts near the peak and still hasn’t broken even.

El Salvador/Microstrategy were not really doing DCA initially. I think Microstrategy doesn't care about that at all, and El Salvador only recently started applying DCA by buying 1 btc a day (if I remember correctly).
But generally speaking, the more frequent your regular purchases are, the better. I would set them as a minimum once a month.

I don't like treating DCA like some sort of superior strategy. I believe timing the market (trying to buy low and sell high) yields better returns. Maybe some sort of hybrid strategy wouldn't be a bad idea.

[Stepstowealth]

You can technically do it like this and twist the strategy in whatever way you want, but the main purpose of DCA is to just buy an equal amount every time, to eliminate the psychological/emotional factor of markets. Changing the amounts every time kind of defeats the purpose of doing DCA.

I will not be comfortable as a person already used to DCA a fixed amount of money based on my income, and then my income increases considerably and then I keep investing that same small fixed amount because I do not want to change the amount. I will like to raise the amount I use. Things can also go the downwards like, maybe my income reduces considerably, and I can no longer continue to invest that amount of money which I saw as small, but now is big. I will not like to stop investing, It will be good for me to just reduce the amount I DCA. So maybe changing the amount to DCA with does not entirely defeat purpose of DCA, there are some times when the continuity in the habit will matter more than the change in amount.

[ZAINmalik75]

DCA strategy is mostly followed by small investors. But the big investors don't care about DCA. But DCA is a good strategy for investing in crypto. And people who are working or have low income but are interested in investing in crypto cannot invest huge amounts so even if they don't want to follow DCA automatically becomes DCA. Because most of them invest some amount after getting salary every month

You have pointed out a good point, because for those who have big chunks of money, why would they wait for next week or next month, whatever the time period they have chosen? While they can lump sum in buying BTC all at once, And in some cases, doing lump sum is better than doing DCA, like in the times of dump in the market. But those who don't have enough funds to take entry are only left with the option of doing DCA.

But according to my knowledge, DCA and lump sums are not that hard, as it is hard to keep them in your wallets. Because with big money and ownership comes big responsibility.

But I have seen big investors do DCA because they think accumulating BTC is all that matters, and they obviously have some funds for unexpected events like the dips. Because of dips, people can get their hands on more satoshi and then make more profits in the next bull run. But those who are doing DCA must have some good knowledge too. Because most people think that, they don't really need knowledge or a great sense of the market while doing DCA. And in my sight, that's wrong.

[mv1986]

Hello! I'd like to seize this moment to offer my insights on the Dollar-Cost Averaging (DCA) strategy, aiming to clarify its concept and its intended purpose for those who may still find it unclear.

DCA involves consistently investing smaller, equal amounts over time, as opposed to making large, irregular crypto purchases. Think of it as making payments for a product in installments, at regular intervals, until the total is paid off. When you regularly invest in your preferred cryptocurrencies, you automatically accumulate more assets over time, regardless of market fluctuations. This can help you grow your holdings and potentially reduce your overall average cost during market dips.

In contrast, a lump sum payment is a one-time investment, the opposite of DCA.

Let's delve into how DCA operates:

Imagine the current price of BTC is $20,000, and you're a high-earning individual looking to invest in this asset. If you make a lump sum investment, you would acquire one BTC at a cost of $20,000.

However, with DCA, you spread that $20,000 across five equal $4,000 purchases, resulting in costs of $20,000/BTC, $15,000/BTC, $5,000/BTC, $5,000/BTC, and $25,000/BTC. This approach yields an average cost basis of $18,000, and you'd have 2.3 Bitcoin. When Bitcoin's price eventually rises, your gains can be amplified because you lowered the average cost of acquiring your holdings. With DCA, you steadily accumulate more Bitcoin, even during market ups and downs.

To illustrate, your first purchase acquires 20% of 1 BTC at $20,000. The second purchase, at $15,000, gets you 26.66% of 1 BTC. Your third and fourth purchases, both at $5,000, result in a total of 80% of 1 BTC with each buy. Your final purchase, at $25,000, represents about 16% of 1 BTC. In total, you've accumulated around 2.3 BTC.

However, it's important to note that DCA may not always work in your favor. In some situations, it could increase your average cost, especially during a bull run. Nevertheless, the purpose of DCA is to spread your investments incrementally, which can be advantageous in the long run. It provides a balanced approach to accumulating assets, ensuring you still acquire your desired cryptocurrency. I hope this explanation sheds light on the essence of DCA.

I am going to quote part of a post here because I think it adds value to the conversation and what you are actually looking for:

People are trying to figure out the best way to invest in cryptocurrency because it can be very unpredictable. If you're an investor looking to reduce your risk, you might consider a strategy called dollar-cost averaging (DCA). However, using this strategy means you're less likely to make really big profits.

No, that strategy doesn't mean you're less likely to make really big profits. Many people say this in hindsight knowing what the price of Bitcoin was over all those early days/years. But check out this example provided by JayJuanGee:

Frequently I have brought up an example of someone who might have lump sum bought BTC in 2015, and s/he bought 20 BTC for around $6,660 (so the average price per BTC is around $333), as compared with someone who might have ended up buying more regularly and more frequently and spending $100k in order to buy 100 BTC between 2015 and 2019 with an average cost of $1k per BTC

Today.  Which one would you rather be?  The one who has 20 BTC has much greater profits 3x more profits since his cost are only around $333 per BTC as compared to the one with 100 BTC and a cost that is 3x higher per BTC.  Total portfolio value is $520k for the one with 20 BTC and $2.6 million for the one with 100 BTC.

JayJuanGee also provided a link for a DCA calculator that you can use to play around with. There is no strict rule that says DCAing will get you less compared to investing a lump sum.  It's all about timing, and timing is about luck. With a lump sum that luck can be bad, neutral or good and the scale is veeeery large from bad to good when it comes to specific timings.

The answer has been given here that you can twist numbers and amounts and timing and time ranges as much as you want and then get the result you are looking for. If you want to find out that DCA would make you be worse off, just change your timings or a potential initial lump sum and there you go. But when you take a realistic example like the one provided by JayJuanGee, there is no tweaking in the parameters down the road. There is a starting date and an end date and it is impressive how DCAing did in fact outperform a lump sum.

This is because you have those peaks like in 2017 at just under 20k and then it goes down all the way to I think 3.5k and that is when your DCA approach really kicks in. You are buying Bitcoin all the way down in predefined intervals and you benefit from every single bit of the price drop until it reached the bottom. From there every buy you made/make gives you the full benefit of the bull run up to the almost 70k we had. A lump sum is like throwing a dart with a blindfold. It can be amazing, but a lump sump invested after the first bull run up to almost 20k would have probably killed you emotionally unless you really didn't need the money. Going down from 20k to 3.5k is very painful to watch. Doing so while investing with a DCA strategy lets you still sleep very well because you had a plan in place from the very start and lower prices means more Bitcoin. Hence price development does not only have one side of the coin, you always have something positive to look at.

[Dr.Bitcoin_Strange]

If you regularly study the discussion on Buy the Dip and Hold, you will get more insight about the DCA strategy. Like the first comment corrected you, using the DCA strategy doesn't mean you should invest only a small amount over time. While using the strategy to invest in Bitcoin, your allocation could vary depending on what you want and how much you are capable to invest at once.

For someone else, they can decide to just keep investing a small amount every week or every month, but for another person, she or he can decide to invest a huge amount every week or month too. So, DCA doesn't compell you to only invest a fixed amount; it's a strategy that allows you to buy Bitcoin at different prices. For example, you might buy Bitcoin at $26k this week, and the next week you want to buy it, it might drop to $25,600, and so on (it could also increase).

DCA can be applied in two ways. The first way is your example, like when you already have a huge amount ($100k or more) to invest in Bitcoin but you don't want to invest it all at once. The second way is when you are working and receiving a salary, and you keep allocating some percentage of your salary to Bitcoin every month or week, depending on how you receive your salary. Your allocation every month could vary.

[Mr.suevie]

You can technically do it like this and twist the strategy in whatever way you want, but the main purpose of DCA is to just buy an equal amount every time, to eliminate the psychological/emotional factor of markets. Changing the amounts every time kind of defeats the purpose of doing DCA.

I will not be comfortable as a person already used to DCA a fixed amount of money based on my income, and then my income increases considerably and then I keep investing that same small fixed amount because I do not want to change the amount. I will like to raise the amount I use. Things can also go the downwards like, maybe my income reduces considerably, and I can no longer continue to invest that amount of money which I saw as small, but now is big. I will not like to stop investing, It will be good for me to just reduce the amount I DCA. So maybe changing the amount to DCA with does not entirely defeat purpose of DCA, there are some times when the continuity in the habit will matter more than the change in amount.

Well said mate, I also that the continuity is what really matter because DCA doesn't really have a specific fixed amount you are supposed to use but rather its about the continual and constant buying of small fraction of Bitcoin from your little earning because buying Bitcoin from your hard earn physical cash to save it what I think it's really the major reason of people actually doing it.

[stompix]

You even don't have to use a same amount of capital for each DCA round. Sometimes you can use smaller or bigger amount of capital for a DCA round. Because it can depends on your feeling about the market trend as well as your available funds for DCA at that time. If you see the market is good and you have money in hands, you can DCA with doubled capital than your normal amount.

That's gambling!
DCA is dollar cost average, when you break this rule it stops being DCA and as I said is basically buying based on a hunch or your guts.

Dollar-cost averaging involves investing the same amount of money in a target security at regular intervals over a certain period of time, regardless of price.

See how simple it is, it's x amount every week, every day every month, not x on monday maybe not this weekend, maybe z on Friday, then 6 months nothing then 10 times more, this is not a plan this is pure chaos.

I will not be comfortable as a person already used to DCA a fixed amount of money based on my income, and then my income increases considerably and then I keep investing that same small fixed amount because I do not want to change the amount. I will like to raise the amount I use. Things can also go the downwards like, maybe my income reduces considerably, and I can no longer continue to invest that amount of money which I saw as small, but now is big. I will not like to stop investing, It will be good for me to just reduce the amount I DCA. So maybe changing the amount to DCA with does not entirely defeat purpose of DCA, there are some times when the continuity in the habit will matter more than the change in amount.

This is completely different.
If you have averaged a buy of $100 a week for a year and then you get a pay rise and afford $200 it doesn't mean you're not DCA anymore, you can think of this like having two plans, one that started two years ago and one that started now.
If we would think like that basically nobody in countries with 100% inflation would be able to keep a DCA over the years, imagine somebody still buying bitcoin worth 10 Zimbabwe dollars when a loaf of bread went from 1 to a trillion.

[pawel7777]

That's gambling!
DCA is dollar cost average, when you break this rule it stops being DCA and as I said is basically buying based on a hunch or your guts.

If you want to be a purist then maybe. But DCA doesn't have any hard, legal definition. Modified DCA is still DCA, poorly executed DCA is still DCA. I don't think most of the investors who choose to follow the strategy would care about the payments and timing being 100% the same all the time. Small deviations won't do much harm. And to do it properly over a long time, you should account for inflation as well, meaning the amount of each purchase should be adjusted for the inflation rate.

[serjent05]

You can technically do it like this and twist the strategy in whatever way you want, but the main purpose of DCA is to just buy an equal amount every time, to eliminate the psychological/emotional factor of markets. Changing the amounts every time kind of defeats the purpose of doing DCA.

I will not be comfortable as a person already used to DCA a fixed amount of money based on my income, and then my income increases considerably and then I keep investing that same small fixed amount because I do not want to change the amount. I will like to raise the amount I use. Things can also go the downwards like, maybe my income reduces considerably, and I can no longer continue to invest that amount of money which I saw as small, but now is big. I will not like to stop investing, It will be good for me to just reduce the amount I DCA. So maybe changing the amount to DCA with does not entirely defeat purpose of DCA, there are some times when the continuity in the habit will matter more than the change in amount.

You can always modify your DCA, I also believe what @pawel7777 stated.  I also think that when to execute the buying time is a crucial thing since I believe DCA is not meant only for a regular basis of buying but rather it is also used to average down our entry price.  

So buying during the lower lows is way much better than blindly following a weekly basis buy schedule since the price may get higher during our scheduled buy time. If that happens, it beats the purpose why we are doing this DCA thing.

[Mauser]

DCA involves consistently investing smaller, equal amounts over time, as opposed to making large, irregular crypto purchases. Think of it as making payments for a product in installments, at regular intervals, until the total is paid off. When you regularly invest in your preferred cryptocurrencies, you automatically accumulate more assets over time, regardless of market fluctuations. This can help you grow your holdings and potentially reduce your overall average cost during market dips.

I am a huge fan of the DCA method and would recommend it to anybody that is looking for ways to add crypto currencies to their portfolio. Finding the optimal time to buy and sell our coins is nearly impossible, it requires a lot of research and even then, we still need some luck to hit the exact bottom or top to make the best possible trade. Trying to chase these optimal timings can become frustrating and that is why I like the DCA method so much, we acknowledge the issue and look for an alternative approach. The traditional DCA method works great when you have a large amount of money that you are looking to invest in the next few months. In my situation it's a bit different, I don't have any large amounts of money to invest and can only save a part of my salary each month. In that case I relax the DCA requirements a bit and don’t buy a fixed amount each month. For anybody like me that has different amounts available each month I would also recommend to just buy the coins each month and don’t worry so much about the purchase price each time, on average it should be a good price.

[WatChe]

You can always modify your DCA, I also believe what @pawel7777 stated.  I also think that when to execute the buying time is a crucial thing since I believe DCA is not meant only for a regular basis of buying but rather it is also used to average down our entry price.  

So buying during the lower lows is way much better than blindly following a weekly basis buy schedule since the price may get higher during our scheduled buy time. If that happens, it beats the purpose why we are doing this DCA thing.

You need to settle your buying pattern even if you are doing DCA. Buying more when price is high and less when price is down is of no use to me. Right now price is down and there is anticipation in the market that price will go up to 30k, so there is more benefit in DCAing right now then if price reaches 30k. There is no fix pattern for doing a DCA, you have to mix your own strategy about when to buy more.

[Kakmakr]

I do not like the DCA method, because you are forced to buy at regular intervals and you cannot capitalize on the fluctuations in the price. I think it is better to buy low and to sell high.

I would much rather hoard when the price are high and buy when the price is low and then sell again and acquire more bitcoins when I use the increased profits from the coins that I sold at a high price. 

[jossiel]

However, it's important to note that DCA may not always work in your favor. In some situations, it could increase your average cost, especially during a bull run. Nevertheless, the purpose of DCA is to spread your investments incrementally, which can be advantageous in the long run. It provides a balanced approach to accumulating assets, ensuring you still acquire your desired cryptocurrency. I hope this explanation sheds light on the essence of DCA.

Despite being the best strategy that one can follow until the next bull run. There will be the pros and cons depending on the individual's situation. But for me, there's really no disadvantage on it because you're not obliged to invest a lot and you'll just do it religiously or when you're able.

The beauty of this strategy is that you're not pressured, you don't have a forceful plan that you need to fill it when you have or no money at all.

Stress free strategy but very effective.

[Salahmu]

To me DCA method is very nice especially the beginners because as a beginner investing on Bitcoin you could get overwhelmed and start investing aggressively without knowing you could run out of funds and as such making you to sell some of your investment to attend or sorts your needs but with DCA method your mindset of accumulating will change were as you will be guided on how to accumulate with a little funds but more consistent and plans for reserve funds or rather emergency funds that would take care of any needs that arise and keeps you consistently accumulating, so DCA may have other loopholes but is actually good for the beginners for risk management were as they feels more relaxed and rest of mind but it will take a long time to accumulate enough using DCA.

[Blitzboy]

To me DCA method is very nice especially the beginners because as a beginner investing on Bitcoin you could get overwhelmed and start investing aggressively without knowing you could run out of funds and as such making you to sell some of your investment to attend or sorts your needs but with DCA method your mindset of accumulating will change were as you will be guided on how to accumulate with a little funds but more consistent and plans for reserve funds or rather emergency funds that would take care of any needs that arise and keeps you consistently accumulating, so DCA may have other loopholes but is actually good for the beginners for risk management were as they feels more relaxed and rest of mind but it will take a long time to accumulate enough using DCA.

The DCA approach may be the bitcoin industry's best-kept secret. Ever pondered why so many individuals rush in, make huge investments, and then lose everything? Perhaps because certain factors favor it that way. When beginners lose, someone else profits.

By consistently investing with DCA, you're defying the unspoken "rules" set by the high and mighty of the finance realm. You're not their ideal client; you're too careful, too wise. Sure, it'll take time to build a significant stash, but isnt time on your side when you're not playing into their hands?

[lombok]

DCA is my favorite strategy. And it has proven to be effective with the long-term investment targets that I am planning.

Although there are market discrepancies when using DCA, in my opinion DCA is only effective in the spot market with long-term goals and when the market is bearish like this year. And DCA is not suitable for the futures market, especially with a double model for each open position, for example the first order position is to buy long BTC at a price of 29,500 with funds of $100, then the second order position is 28,300 with $200 and so on, if BTC experiences a flash dump then the risk of being hit by Margin Call will be very high. And in the futures market, there are many liquidity hunters, perhaps if we use funds that ignore Money Management, we will be subject to Margin calls even though we use the DCA system.
That's just my thoughts.

[kingvirtus09]

DCA is simple to understand; we know that it is already used by most people here in the crypto space. Do it when you have a purchase of Bitcoin or altcoins that you can use to provide good savings in the future. The others do it with a fixed amount, or they base it on a percentage, and then they deduct that from their salary.

So it also depends on you, and the best thing to do so that you don't have a hard time with DCA is that when you have the opportunity to buy, you should buy there, but hopefully not for a long time, as long as you have extra money every week. you used to save.

[stompix]

That's gambling!
DCA is dollar cost average, when you break this rule it stops being DCA and as I said is basically buying based on a hunch or your guts.

If you want to be a purist then maybe. But DCA doesn't have any hard, legal definition. Modified DCA is still DCA, poorly executed DCA is still DCA.

Falling with your car down a cliff is still driving since the engine is still running and you're still at the wheel! The thing is pretty simple, once you cut the "average" word out of it, it stops being dollar cost average, just as ice cream without ice is no longer ice cream is at best just cream!
So if you buy based on guts and instincts random sums at random intervals it's either RDC or GRT or PNGYSHYT but for sure not DCA.

The whole point of this strategy is to keep risks of high volatility at a minimum and to spread the investment sums, If you do it randomly why would you even call it DCA and lie to yourself you doing some strategy?

So buying during the lower lows is way much better than blindly following a weekly basis buy schedule since the price may get higher during our scheduled buy time. If that happens, it beats the purpose why we are doing this DCA thing.

How do you know which are the lower lows?
Imagine somebody who has believed in the 40k then 35k then 29k it's the lowest Bitcoin could drop and bought all in and now he's looking on the side with all the money spent waiting for the pump!
Do you know what that was? Gambling, putting his money on the table on a hunch!

[kryptqnick]

You can technically do it like this and twist the strategy in whatever way you want, but the main purpose of DCA is to just buy an equal amount every time, to eliminate the psychological/emotional factor of markets. Changing the amounts every time kind of defeats the purpose of doing DCA.

Yeah, that's what I thought it was like. I think the point is not to get a better deal than when spending a big sum at once, but to avoid thinking about when's the right moment to buy. So a person chooses something more or less fixed in terms of amounts and dates, and just keeps going without worrying whether it's a good or a bad moment, whether it's better to wait or to risk it. This way you have a routine, and it doesn't require overthinking the process or doing any research. It successfully helps accumulate Bitcoin without all that.

[Ale88]

DCA involves consistently investing smaller, equal amounts over time, as opposed to making large, irregular crypto purchases

I don't understand, why are you saying that the investment amounts are smaller or equal over time? They can also become bigger: oftentimes people who chooses this strategy is because they have limited amount of money available, let's think about an employee for example, so every month after he gets his salary he has new money available. But if he gets promoted then that investment could also go up of course if he doesn't change his lifestyle.