Bitcoin dollar-cost averaging is the investing process of converting a particular amount of US dollars into a Bitcoin at regular intervals of time. You would most times see it abbreviated as DCA. An example would be buying ten dollars of Bitcoin weekly, you would be dollar cost averaging in $10 per week.
This technique is primarily used by long term investors. This insulates them from allocating all their capital at a peak price.
An example of investing in Bitcoin without DCA could be Sarah buying five thousand worth of Bitcoin on the 1st of January 2018
The price of Bitcoin at the time was $13,800 per coin, which means she now has 0.362 BTC.
An example of investing in bitcoin making use of DCA would be Joseph purchasing five thousand worth of Bitcoin, however he continues buying five hundred dollars monthly for ten months.
After ten months, Joseph owns 0.61 bitcoin. This is almost twice of what Sarah owns. Though they both invested with the same five thousand dollars.
Watch a full breakdown on Dollar Cost Average Strategy:
https://www.youtube.com/watch?v=UMvlEo0iEZo
Bitcoin Dollar Cost Averaging Strategy
If you’ve traded before with some experience, you would quickly notice your performance of your dollar-cost averaging strategy could increase when you make use of simple techniques.
If you want to follow this plan, you could buy Bitcoin whenever these techniques give you a signal, instead of waiting for a particular time.
Some examples of these signals traders make use of include purchasing bitcoin approaches like that of a high time frame which moves using an average time like the 200 DMA. Looking for an oversold condition like MACD or RSI, or making use of a valuation technique like the flow or stock model.
Or in layman's terms: BUY THE DIP WHENEVER YOU CAN!
DCA is a great technique for investors that want to gain a long term exposure to Bitcoin.
Benefits of DCA
Reduces the fear of buying tops
DCA is typically based on the idea of splitting your investment into smaller purchases that are made at a regular time interval.
Because you are not putting all your capital at the same time, you can't invest all your money at the top. This is important for assets like Bitcoin, it can drop from a high price in a short time.
This is why it is important to invest in smaller amounts.
This does not need a high upfront investment.
Because Dollar Cost Averaging strategies are made using regular but small purchases, you don't need to put a high amount of your capital from the beginning. This is great if you don't feel okay with putting all your savings into bitcoin. Just to keep putting a small chunk of your paycheck monthly.
With this you know if anything goes wrong, you're a lot less likely to get rekt in one afternoon.
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