What Is DCA In Crypto? Is It The Best Investment Strategy In Crypto?


11 June 2022

If you are looking for information on how to invest in cryptocurrencies, you should have no difficulty finding the phrase “DCA” on almost any social channel that discusses cryptocurrencies. But what actually is DCA crypto meaning and is it good? DCA is among the most common techniques employed by investors. Additionally, DCA has been used for many decades, not just for crypto but also for various other markets.

Let’s find out why the DCA approach is the one that the majority of investors choose to use for their assets over the long term. Explore, in conjunction with bePAY, what is DCA in crypto as well as the pros and cons of using this long-term approach. Now it is time to hit the definition of what is DCA in crypto? Don’t wait anymore, let’s move on.

What Is DCA In Crypto?

What exactly is DCA crypto meaning? DCA is a long-term strategy in which an investor consistently purchases smaller quantities of an asset over time, regardless of the asset’s price (for instance, investing $100 in Bitcoin every month for a year instead of $1,200 all at once). Their DCA schedule may evolve over time, and depending on their objectives, it may span a few months or several years.

This allows you to profit from cryptocurrency market declines. This lets you preserve greater liquidity and profit from market advances without putting too much capital at risk at any given time lets you preserve greater liquidity and profit from market advances.


What is DCA in crypto?

Although DCA is a popular method for purchasing Bitcoin, it is not exclusive to cryptocurrencies; traditional investors have used it for decades to weather stock market volatility. You may already be utilizing DCA if you contribute to your employer’s retirement plan every pay period.

Ultimately, DCA averages out your investments so that, over time, you are investing in your chosen cryptocurrency without being as influenced by extremely high or low points as you would be if you invested a huge quantity all at once.

>> Learn about other methods to survive in a bear market

How Does DCA Crypto Work?

With dollar-cost averaging, you determine the overall amount you desire to invest as well as the investment product(s) of your choice – stocks, cryptocurrencies, commodities, etc. Then, rather than investing the money as a single sum, you invest it in equal increments over a certain time period.

There are vehicles like 401(k) plans and some dividend reinvestment plans that can execute your DCA transactions automatically. Once configured, purchases are made automatically, independent of asset price or market movement.


How does DCA crypto work?

By committing to dollar-cost averaging, you will occasionally invest when the market or a specific asset has declined in value. It also implies that there will likely be instances when you purchase during a market sell-off, in which a large number of assets are sold in a short period of time.

During bad markets, some investors may be reluctant to acquire equities (markets experiencing price declines). However, when seen from a different angle, purchasing when the market down allows you to acquire potentially profitable assets at extremely cheap prices, which may be different from those in your DCA plan. By purchasing when others may be selling, you might possibly be able to reap the rewards of buying low and selling high.

Detailed Example Of DCA Crypto Vs. Lump Sum


DCA vs Lump-Sum in crypto

The success of any DCA approach is still contingent on what’s occurring in the market. To explain, let’s look into an example utilizing real-world prices, exactly as they neared Bitcoin’s worst decline to date. If you invested $100 in Bitcoin every week starting on December 18, 2017, at a price of nearly $19,114/BTC until January 25, 2021, when the price is traded at $32,239, the total return is 299.85% for this Dollar Cost Average Strategy.

Date BTC Price Dollar Cost Average Lump-sump
Total Invest Profit/Loss Total Invest Profit/Loss
Dec-18-17 $19,114 $100 0 $16,300 0
Dec-17-18 $3,539 $5,300 -$2,986 $16,300 -$4,521
Dec-16-2019 $6,923 $10,500 $11,982 $16,300 -$8,611
25-Jan-21 $32,239 $16,300 $65176 $16,300 $34,719
Total Return +299.85% +113.00%

However, it isn’t always a good idea. Let’s imagine you did the same things but in a different period. Back 1 year ago, you were in the summer of the crypto sphere between Jan 2021 and Dec 2021, and now you have started to invest $100 in Bitcoin every month. 

In this scenario, your portfolio would amount to just a little over $1577 at the end of 2021, compared to $2340 from investing a lump sum. This “all-in” investment would have given you a bigger reward, but it would also have been riskier; any major price swings after your original investment date would have harmed your complete investment.

Date BTC Price Dollar Cost Average Lump-sump
Total Invest Profit/Loss Total Invest Profit/Loss
1-Jan-21 $29,329 $100 0 $1,200 0
1-Feb-21 $33,506 $200 $214 $1,200 $1,371
1-Mar-21 $49,581 $300 $417 $1,200 $2,029
1-Apr-21 $58,714 $400 $594 $1,200 $2,402
1-May-21 $57,791 $500 $685 $1,200 $2,365
1-Jun-21 $36,689 $600 $535 $1,200 $1,501
1-Jul-21 $33,511 $700 $588 $1,200 $1,371
1-Aug-21 $39,862 $800 $800 $1,200 $1,631
1-Sep-21 $48,807 $900 $1,079 $1,200 $1,997
1-Oct-21 $48,141 $1,000 $1,164 $1,200 $1,970
1-Nov-21 $60,900 $1,100 $1,573 $1,200 $2,492
1-Dec-21 $57,197 $1,200 $1,577 $1,200 $2,340
Total Return +31.46% +95.02%

>> Recommend: learn more about strategies to maximize your passive income in crypto

What Are Benefits Of DCA?

The typical investor may gain from DCA in a number of ways. When it comes to cryptocurrencies, this is particularly true:

It might be difficult to justify purchasing more of an asset when the price has fallen. DCA removes this emotion from investing. When prices are low, you can purchase more with DCA, and when prices are high, you can buy less. An average cost per unit should fall over time as a consequence of this strategy, rather than investing everything at once.

Suit for long-term: As a long-term strategy, DCA is a good fit. Because equities and cryptocurrencies are often held for a longer period of time, DCA is better suited to investors with a longer time horizon.

Avoid volatility: Volatility is a fact of life when it comes to cryptocurrency. You may reduce the danger of purchasing too much in one lump by using DCA in cryptocurrencies like Bitcoin. In the long run, your position in cryptocurrencies will dull the worry that price fluctuation causes.


DCA beneficial aspect

Invest without fear of missing out: If you want to buy cryptocurrency but aren’t sure how to go about it, dollar-cost averaging may be the answer. Even if you’re not sure if you’re purchasing an investment at a cheap or high price, you should still acquire cryptocurrencies because you don’t want to lose out.

Reduce research time: For individuals who believe in cryptocurrencies as a long-term answer but don’t have the time to perform extensive research, DCA may be a good option. Due to the fact that no cryptocurrencies are being purchased at this moment, the amount of time spent undertaking extensive research will be reduced.

FAQs About DCA In Crypto

Is DCA Good For Crypto?

DCA can be an effective strategy to acquire cryptocurrency without the infamously tough task of timing the market or the risk of unintentionally investing “a lump sum” at the market’s high. The key is picking an amount that is affordable and investing consistently, regardless of the asset’s price.


Is DCA good for crypto?

What Are The Best DCA Crypto Calculators?

By searching for information on the internet, you can easily find some of the best DCA Crypto Calculators, tools that help you calculate the investment amount after a long time. You could try DCA Crypto Calculator or dcaBTC. These tools are almost free and may be useful for your investments.  

Is Dollar-Cost Averaging Crypto Safe?

Dollar-cost averaging on Bitcoin should be undertaken with considerable care and attention. Not all crypto will result in a favorable return on investment. Always conduct your own research (DYOR) before deciding to adopt the DCA investment approach for investing in crypto.

However, if you DYOR and invest in a durable cryptocurrency, the DCA technique is one of the safest investing strategies known in the game.

Wrapping Up

Dollar-cost averaging is a proven method for starting a position while reducing the impact of investment volatility. It entails breaking the investment into smaller portions and purchasing on a regular basis.

The primary advantage of employing this method is as follows. It is tough to time the market, and individuals who do not intend to actively monitor the markets might nevertheless invest in this manner.

Nevertheless, according to some naysayers, dollar-cost averaging might cause some investors to miss out on bull market returns. However, missing out on certain profits is not the end of the world; dollar-cost averaging remains a useful investment technique for many.