If you’re new to crypto and want a long-term investment strategy that works, but you don’t have the time or will to start a trading course, there’s a method that can get you started without deep technical knowledge. Using Dollar Cost Averaging (or DCA), you can build up your investment portfolio without any serious trading skills. What’s more, you don’t even need to keep an eye on the market regularly. So, what’s this all-powerful strategy? Dollar Cost Averaging Crypto is a long-term investment strategy where you choose a specific crypto asset you want to buy and decide on a fixed amount and how much time will pass between one purchase to another, you repeat the purchasing process for an extended time period. For instance, you choose to buy $400 worth of Bitcoin each 1st day of the month, regardless of Bitcoin price, for a period of five years. By setting a predetermined amount and time frame, you will reduce losses caused by impulsive decisions, trying to time the market, and stress from trading. The DCA process basically averages your asset buying price on each purchase, turning it into a complete technical process that reduces the impact of market volatility. It is a proven method used by both beginners and experienced investors.
DCA Daily or Weekly: How to Time Your Strategy?
The point of dollar cost averaging is that you shouldn’t stress too much about your investment day and night. If you want to DCA daily or weekly, it’s preferable not to use dollar-cost averaging strategy on a daily basis, as it requires active involvement in the buying process. This contradicts the core purpose of DCA, which is to provide a passive investment strategy that is not affected by the market price or trend. Buying once a week reduces your involvement, making the process less stressful. Our experts at PlasBit are clear on this: dollar cost averaging crypto is only worth it if you do it on a weekly or monthly basis. Day trading and just in general, constantly looking for the next move can take a huge psychological toll. Learning how to become a great (and successful) trader requires a lot of time and effort. There is a sea of courses promising you just “30 minutes of your time every day”, but you end up wasting most of your day anxiously monitoring the market.
Don’t fall for these cheap tricks: No one learns day trading through a course, and no one has ever mastered their craft by spending just half an hour per day on honing it. It takes serious work and discipline, plus mental strength, to succeed as a day trader, and don’t forget that most who succeed are trading as a full-time job, not a side hustle to make some money. Dollar cost averaging is for you if you want to grow your portfolio steadily without the stress and commitment that comes with trading. Doing DCA weekly or monthly sets you apart from “traditional” traders: it’s more similar to managing your own savings account than actually trading. DCA weekly or monthly can be a sound strategy for life savings, like putting aside money for your children or for yourself once you’re retired. So, should you DCA crypto? And if so, which currency is ideal for dollar cost averaging?
Is DCA Bitcoin a Good Idea?
Bitcoin is the staple of cryptocurrencies, so it’s normal to wonder: Is DCA Bitcoin a good idea? Yes, it's great for long-term investing because it reduces the stress of finding the correct entry points when buying Bitcoin and you don't have to time the market as the process is set from the get-go. It helps investors gradually and passively build up their Bitcoin holdings without having to worry about market trends. DCA is a low-stress, long-term stacking strategy, and BTC is probably one of the best choices for it. To be fair, there are some downsides next to the upsides, so here’s a fair assessment before you start ditching your savings on BTC:
- Long-term gains. This is key: BTC is still up, and even if you invest a little, it can get you a profit in a few years.
- Volatility is king. DCA is best in changing markets, which is true for BTC as well. You buy more when the price dips and buy less when it peaks, averaging out your cost after some time.
- No stress. Day trading is all about timing. DCA removes that anxiety as you can start investing in BTC whenever you want.
- Risky business. Volatility is awesome, but if you have limited savings, keep in mind you might run out of money before making any gains.
- Mass adoption matters. BTC is popular but far from a household name. Bans, regulations, scams can affect your investment as well.
- Short-term losses. You might lose some of your investment in the short run, so don’t expect dollar cost averaging making you a lot of money in a year or two.
Keep these tips in mind and you’ll be safe. DCA is trading made for those who want some gains with as little stress or attention as possible.
Creating a Dollar Cost Averaging Strategy in 4 Simple Steps
Now that you’re up to speed on dollar cost averaging crypto, it’s time to put together your actual strategy. In 4 steps, we put together the ultimate PlasBit guide to a sound DCA plan.
Step 1: Find the right asset
Before dumping your savings into any project, make sure it has long-term potential and isn’t just fueled by hype. Look for clear use cases, strong dev activity, a thriving community, and rock-solid tokenomics. When reading your candidate’s whitepaper, there are a few things to watch out:
- Length. The goal of any whitepaper is to explain its technology. If the whitepaper is short, don’t even bother and move on to the next candidate. Anything under 15 pages is a red flag.
- Technology. If the whitepaper is above 15 pages in length, it should also contain at least 50% techy content. Dodgy projects will fill up the space with dreamy promises and surreal timelines, but you need to look for cold-hard facts: logical architecture, programming language, APIs, well-reasoned protocol, and a feasible roadmap. The latter is crucial: if the roadmap is making unrealistic expectations, it’s a telltale sign that the owner won’t finish the project.
- Compliance. Any whitepaper should detail how the project plans to register with their regulatory bodies or what type of regulatory exemptions the company is filing. This serves as a safety net when it comes to regulations, preventing the project from being shut down prematurely.
- Budget. Being shady about the project’s cash flow should raise alarm bells. The whitepaper should detail what the company is planning to do with the funds raised during the ICO. If more than ¼ of the money goes to founder salaries, run.
- Token count. Be wary of ICOs that reserve the right for future token sales. Supplies should be stated clearly in whitepapers: how much is available for purchase, what will owners do with unsold tokens, etc.
- Cap on ICO. Seed investments don’t require a crazy deal of money. Any ICO that calls for hundreds of millions of dollars is shady at best.
- Language. This is slightly subjective, but a well-worded and formatted whitepaper shows care and professionalism. Anything short of that mark should raise a red flag.
DCA, or Dollar Cost Averaging, is a sound long-term strategy in crypto
Step 2: Decide on the amount
Now that you have found your project, it’s important to know that this is not the time to go all in. Dollar cost averaging means investing regularly without destabilizing your household economy. Pick an amount that fits your budget and doesn’t stress you out if you’re failing to make less money. This can be 10 bucks a week or $500 a month - the point is to invest money that can be left untouched for years. DCA is about consistency. Don’t make commitments you can’t sustain in the long run.
Step 3: Decide on the interval
You already know that if you commit to DCA, you’re not becoming a stressed-out day trader. So your only choice here is whether to make weekly, bi-weekly, or monthly investments. Shorter term intervals might require more action (=anxiety) but it also smoothens out the usual volatility that comes with cryptocurrencies. Longer intervals (e.g. monthly) can be less stressful and also aligned with your paycheck, rent, bills, and so on. This is safer but you are also catching fewer price points: cryptos swing a lot, and longer intervals might make you miss more lucrative entry points.
Step 4: Execute
Now you have your project, you know how much you can spend on it, and you locked in your budget as well. DCA only works if you stay consistent. FUD, market swings, hyped up projects, no matter what comes along, you’re sticking to your guns. It might look bad for months, even a year - but you are in for the long haul. Remove emotions, ignore your phone, and just trust the process and stick to DCA like a robot.
Double Check These Red Flags Before Investing
You can never be quite sure if a project is legit, so we picked a few more that indicate a scam. If you see just one of these, think twice before investing any of your money:
Promises of high returns sound good on paper, but they rarely happen. If a project talks about low risks and high rewards over a short period of time, something is fishy.
Pressure to invest fast isn’t a great look, either. Scammers want to pressure you into making rash decisions, but in reality, serious investments can’t be made overnight.
Unsolicited offers about once-in-a-lifetime investments can land in your DMs on social and other messaging apps. Do your research before accepting any of these dodgy opportunities.
Fake endorsements from influencers and celebrities are often used to boost the credibility of a project. Verify these by checking the official channels of these individuals or organizations.
Free money doesn’t exist, but scammers keep promising you that if you send some of your crypto, they will give you a larger amount.
Unregulated platforms make for poor investments. Make sure the platform conforms to regulations and maintains a good rep within the community.
Dollar Cost Averaging Bitcoin Since 2020: A Case Study
Let’s see a PlasBit case study that brings us back to 2020. At the beginning of the year, BTC’s value was in the low 7 thousands, but as you might know, it soon sky-rocketed to over $50,000. Assuming that you had 100 bucks to spare on the first day of every month, and you decide to start dollar cost averaging. The formula is simple: keep buying BTC for $100 on the first day of every month, regardless of its price change. Here’s how our imaginary scenario looks like:
| Date | Amount | BTC Price | Total Investment Amount | Investment Portfolio Value | Average Price | Investment Amount in BTC | Total BTC Portfolio | Change in Percentage | P/L |
|---|---|---|---|---|---|---|---|---|---|
| 1.1.20 | $100 | $7,194 | $100 | $100 | $7,194 | 0.01389875 | 0.01389875 | 0% | $0 |
| 1.2.20 | $100 | $9,346 | $200 | $229 | $8,270 | 0.01069935 | 0.02459810 | 15% | $29 |
| 1.3.20 | $100 | $8,599 | $300 | $311 | $8,380 | 0.01162823 | 0.03622633 | 3.8% | $11 |
| 1.4.20 | $100 | $6,437 | $400 | $333 | $7,894 | 0.01553441 | 0.05176075 | -16.7% | -$66 |
| 1.5.20 | $100 | $8,672 | $500 | $548 | $8,050 | 0.01153032 | 0.06329108 | 9.8% | $48 |
| 1.6.20 | $100 | $9,463 | $600 | $698 | $8,285 | 0.01056679 | 0.07385787 | 16.5% | $98 |
| 1.7.20 | $100 | $9,145 | $700 | $775 | $8,408 | 0.01093375 | 0.08479162 | 10.8% | $75 |
| 1.8.20 | $100 | $11,322 | $800 | $1,060 | $8,772 | 0.00883191 | 0.09362354 | 32.5% | $260 |
| 1.9.20 | $100 | $11,679 | $900 | $1,193 | $9,095 | 0.00856214 | 0.10218568 | 32.6% | $293 |
| 1.10.20 | $100 | $10,795 | $1,000 | $1,203 | $9,265 | 0.00926333 | 0.11144901 | 20.3% | $203 |
| 1.11.20 | $100 | $13,781 | $1,100 | $1,635 | $9,676 | 0.00725636 | 0.11870538 | 48.7% | $535 |
| 1.12.20 | $100 | $19,633 | $1,200 | $2,430 | $10,506 | 0.00509326 | 0.12379865 | 102.6% | $1,230 |
| 1.1.21 | $100 | $28,994 | $1,300 | $3,689 | $11,928 | 0.00344898 | 0.12724763 | 183.8% | $2,389 |
| 1.2.21 | $100 | $33,114 | $1,400 | $4,313 | $13,441 | 0.00301981 | 0.13026745 | 208.1% | $2,913 |
| 1.3.21 | $100 | $45,159 | $1,500 | $5,982 | $15,556 | 0.00221437 | 0.13248183 | 298.9% | $4,482 |
| 1.4.21 | $100 | $58,926 | $1,600 | $7,906 | $18,266 | 0.00169702 | 0.13417885 | 394.2% | $6,306 |
| 1.5.21 | $100 | $57,714 | $1,700 | $7,844 | $20,587 | 0.00173266 | 0.13591152 | 361.4% | $6,144 |
| 1.6.21 | $100 | $37,293 | $1,800 | $5,168 | $21,515 | 0.00268141 | 0.13859293 | 187.1% | $3,368 |
| 1.7.21 | $100 | $35,035 | $1,900 | $4,955 | $22,226 | 0.00285420 | 0.14144714 | 160.8% | $3,055 |
| 1.8.21 | $100 | $41,460 | $2,000 | $5,964 | $23,188 | 0.00241191 | 0.14385905 | 198.2% | $3,964 |
| 1.9.21 | $100 | $47,099 | $2,100 | $6,875 | $24,327 | 0.00212315 | 0.14598220 | 227.4% | $4,775 |
| 1.10.21 | $100 | $43,816 | $2,200 | $6,496 | $25,213 | 0.00228223 | 0.14826444 | 195.3% | $4,296 |
| 1.11.21 | $100 | $61,320 | $2,300 | $9,191 | $26,783 | 0.00163077 | 0.14989521 | 299.6% | $6,891 |
| 1.12.21 | $100 | $56,907 | $2,400 | $8,630 | $28,038 | 0.00175722 | 0.15165244 | 259.6% | $6,230 |
| 1.1.22 | $100 | $46,311 | $2,500 | $7,123 | $28,769 | 0.00215927 | 0.15381172 | 184.9% | $4,623 |
| 1.2.22 | $100 | $38,481 | $2,600 | $6,018 | $29,142 | 0.00259863 | 0.15641035 | 131.5% | $3,418 |
| 1.3.22 | $100 | $43,194 | $2,700 | $6,856 | $29,663 | 0.00231510 | 0.15872546 | 153.9% | $4,156 |
| 1.4.22 | $100 | $45,554 | $2,800 | $7,330 | $30,230 | 0.00219518 | 0.16092065 | 161.8% | $4,530 |
| 1.5.22 | $100 | $38,528 | $2,900 | $6,299 | $30,516 | 0.00259550 | 0.16351616 | 117.2% | $3,399 |
| 1.6.22 | $100 | $31,792 | $3,000 | $5,298 | $30,559 | 0.00314539 | 0.16666155 | 76.6% | $2,298 |
| 1.7.22 | $100 | $19,820 | $3,100 | $3,403 | $30,212 | 0.00504528 | 0.17170684 | 9.8% | $303 |
| 1.8.22 | $100 | $23,336 | $3,200 | $4,107 | $29,998 | 0.00428509 | 0.17599193 | 28.3% | $907 |
| 1.9.22 | $100 | $20,050 | $3,300 | $3,628 | $29,696 | 0.00498740 | 0.18097933 | 10% | $328 |
| 1.10.22 | $100 | $19,431 | $3,400 | $3,616 | $29,394 | 0.00514638 | 0.18612572 | 6.4% | $216 |
| 1.11.22 | $100 | $20,600 | $3,500 | $3,934 | $29,143 | 0.00485421 | 0.19097993 | 12.4% | $434 |
| 1.12.22 | $100 | $17,168 | $3,600 | $3,378 | $28,810 | 0.00582479 | 0.19680472 | -6.1% | -$221 |
| 1.1.23 | $100 | $16,547 | $3,700 | $3,356 | $28,479 | 0.00604305 | 0.20284778 | -9.3% | -$343 |
| 1.2.23 | $100 | $23,137 | $3,800 | $4,793 | $28,338 | 0.00432192 | 0.20716971 | 26.1% | $993 |
| 1.3.23 | $100 | $23,150 | $3,900 | $4,896 | $28,205 | 0.00431948 | 0.21148919 | 25.5% | $996 |
| 1.4.23 | $100 | $28,473 | $4,000 | $6,121 | $28,212 | 0.00351205 | 0.21500125 | 53% | $2,121 |
| 1.5.23 | $100 | $29,227 | $4,100 | $6,383 | $28,237 | 0.00342148 | 0.21842273 | 55.7% | $2,283 |
| 1.6.23 | $100 | $27,218 | $4,200 | $6,045 | $28,212 | 0.00367398 | 0.22209671 | 43.9% | $1,845 |
| 1.7.23 | $100 | $30,471 | $4,300 | $6,867 | $28,265 | 0.00328171 | 0.22537843 | 59.7% | $2,567 |
| 1.8.23 | $100 | $29,230 | $4,400 | $6,688 | $28,287 | 0.00342104 | 0.22879947 | 52% | $2,288 |
| 1.9.23 | $100 | $25,934 | $4,500 | $6,033 | $28,235 | 0.00385593 | 0.23265541 | 34.1% | $1,533 |
| 1.10.23 | $100 | $26,967 | $4,600 | $6,374 | $28,207 | 0.00370818 | 0.23636359 | 38.6% | $1,774 |
| 1.11.23 | $100 | $34,657 | $4,700 | $8,291 | $28,344 | 0.00288539 | 0.23924899 | 76.4% | $3,591 |
| 1.12.23 | $100 | $37,718 | $4,800 | $9,124 | $28,540 | 0.00265125 | 0.24190024 | 90.1% | $4,324 |
| 1.1.24 | $100 | $42,280 | $4,900 | $10,327 | $28,412 | 0.00236517 | 0.24426541 | 110.8% | $5,427 |
| 1.2.24 | $100 | $42,569 | $5,000 | $10,498 | $28,491 | 0.00234908 | 0.24661450 | 110% | $5,498 |
| 1.3.24 | $100 | $61,168 | $5,100 | $15,184 | $29,324 | 0.00163484 | 0.24824934 | 197.7% | $10,084 |
| 1.4.24 | $100 | $71,333 | $5,200 | $17,808 | $30,005 | 0.00140186 | 0.24965120 | 242.5% | $12,608 |
| 1.5.24 | $100 | $60,609 | $5,300 | $15,231 | $29,772 | 0.00164990 | 0.25130111 | 187.4% | $9,931 |
| 1.6.24 | $100 | $67,489 | $5,400 | $17,060 | $30,203 | 0.00148170 | 0.25278282 | 215.9% | $11,660 |
| 1.7.24 | $100 | $62,673 | $5,500 | $15,942 | $29,957 | 0.00159556 | 0.25437839 | 189.9% | $10,442 |
| 1.8.24 | $100 | $64,625 | $5,600 | $16,539 | $30,194 | 0.00154736 | 0.25592576 | 195.3% | $10,939 |
| 1.9.24 | $100 | $58,969 | $5,700 | $15,191 | $29,910 | 0.00169578 | 0.25762154 | 166.5% | $9,491 |
| 1.10.24 | $100 | $63,335 | $5,800 | $16,416 | $30,193 | 0.00157889 | 0.25920043 | 183% | $10,616 |
| 1.11.24 | $100 | $70,216 | $5,900 | $18,300 | $30,597 | 0.00142415 | 0.26062459 | 210.2% | $12,400 |
| 1.12.24 | $100 | $96,461 | $6,000 | $25,240 | $31,053 | 0.00103668 | 0.26166127 | 320.7% | $19,240 |
Three Traders, Three Different Stories of DCA
As you can see, DCA in the crypto world makes a ton of sense. No matter when you get in, if you can stick to your strategy, your portfolio will grow. Now, let’s see 3 fictional traders who reacted differently to BTC’s volatility. All of them started dollar cost averaging by investing $100 each month, but only one remained with the strategy. For the sake of our example, let’s assume all 3 of them started DCA in January 2020.
Trader 1 diligently buys his BTC in the beginning of every month, and despite the small initial gains in the first 18 months, he’s delighted to see that his portfolio is worth 360% more by May 2021. But that summer, BTC’s value plummeted. Trader 1 becomes anxious as he’s lost more than half of his portfolio's worth in a few months. He decided to cash out in July 2021, which seems like a terrible idea that becomes more and more terrible every month. Here’s Trader 1’s final portfolio rundown:
- Got in at BTC price: $7,194.89
- Walked out at BTC price: $35,035.98
- Total portfolio value: $4,955
- Total investments: $1,900
- Total profits: $3,055
- Profit percentage: 160%
- Potential profits by December 2024: $16,195
Trader 2 has the discipline that Trader 1 lacked. He knows DCA means long-term commitment. His portfolio looks healthier every month, but at the end of 2022, reality settles in. He is short on cash and buying BTC for $100 every month suddenly isn’t as simple as it was back in 2020. He realizes he can’t continue his DCA tactics anymore and is strapped for cash, so he decides to take whatever he has. January 2023 is a bad time to do that, but Trader 2 doesn’t have a choice. He takes the money and finishes his 25-month DCA run in the minus. Here’s Trader 2’s portfolio before cashing out:
- Got in at BTC price: $7,194.89
- Walked out at BTC price: $16,547.91
- Total portfolio value: $3,356
- Total investments: $3,700
- Total profits: -$343
- Profit percentage: -9.3%
- Potential profits by December 2024: $21,884
Trader 3 has the commitment and the funds. He sets aside a budget to make sure that he can spare $100 every month for years to come. He HODLs strong against the worst odds, and makes it to the end of year 5 without changing anything in his tactic. He wins big, and if he chooses to, his profits will climb even farther in 2025:
- Got in at BTC price: $7,194.89
- Walked out at: $96,461.34
- Total portfolio value: $25,2
- Total investments: $6,000
- Total profits: $19,240
- Profit percentage: 320%
- Potential profits by December 2024: $0
Now, let’s see how your long-term strategy pays off if you did DCA for 5, 4, 3, and 2 years.
2020-2024 DCA. If you followed DCA faithfully between 2020-2024, your investment portfolio value would be $25,420 after investing exactly $6,000. This is a massive, 320% win (and almost $20,000 in profits) for your investment, and you didn’t sweat too much, just decided to buy BTC every month for $100 and never considered jumping ship. Naturally, starting DCA in early 2020 was a blessing for many, with the cryptocurrency’s value growing by almost 7 times by 2021.
If you started DCA in early 2021, you would’ve made great profits even within a single year
2021-2024 DCA. So, let’s imagine you heard of the hype and decided to jump into crypto in 2021. Same tactic: you’re spending $100 every month on BTC. After the bull run of late 2020 and early 2021, BTC’s value dropped, and your investment was in the negative after more than a year. In July 2022, your $1,900 was worth less than $1,000. So much about dollar cost averaging crypto, right? Well, wrong: the point is to HODL and go through with DCA regardless of how grim things look. By the end of 2023, DCA will have already made you a small profit, and at he end of year 4 in 2024, your $4,800 investment will get you a portfolio worth $13,298.
2022-2024 DCA. 2022 was not the best year to get started with crypto, but for the sake of our example, let’s just say that you saw an opportunity when everyone else was bearish. For 14 full months, this seemed like a bad idea: your constantly invested $100 yielded less than their value, and your investment portfolio was never indicating any profits. But as BTC strengthened, your dollar cost averaging also started to pay off. By the end of 2024, you were looking at a growth of almost 200%. $7000 in profits sounds quite good for doing nothing but buying Bitcoin for $100 every month.
2023-2024 DCA. 2023 was an incredible year for BTC, and if you had tuned in at the beginning, you could have made a small fortune with the right timing. With DCA, you don’t win big, but you win steadily, and that’s what would have happened in this case as well. Out of all 4 examples, this short-term DCA would’ve shown a win every month for each $100 invested. At the end, 2 years of diligent investments translated into a 160% portfolio growth and $3,865 in profits.
HODL and DCA: A Match Made in Heaven
Crypto’s volatility gave birth to a tactic loved and hated by many. HODL (“hold”, also known as “Hold On to Dear Life”) was coined by Bitcointalk user GameKyuubi, who channeled his frustration in a typo-laden forum post focused on why he should’ve HODL-d. The term became a meme, and HODLing is now essential to trading crypto: you are supposed to hold on to your assets even it seems everything is lost. Sounds familiar, doesn’t it?
The birth of a meme and a sound crypto tactic: HODLing
Well, while dollar cost averaging might sound very similar to HODLing, the two are not the same thing. HODL is a mindset and not an actual tactic. It says that whatever your strategy is, you are supposed to be HODLing. DCA, on the other hand, is your actual strategy: it outlines what to buy, when to buy, and how much you should spend on it. In an ideal world, the two go hand in hand: DCA is your framework, and HODL is your game-time attitude. Use DCA to build your position, and deploy HODL to keep it and, after a while, let it grow in value. This combo is perfect if you believe that the best days of the crypto of your choice are still ahead of us.
What Is The Best Time To DCA?
Now that you have your crypto and have set some money aside for DCA, it’s time to decide: what is the best time to DCA? There’s no such thing as the ‘best time to buy’ when using a dollar-cost averaging (DCA) strategy. The whole point of DCA is to avoid timing the market or trying to find the best prices to buy Bitcoin. Instead, it focuses on making predetermined purchases regardless of price or market trends, effectively automating the buying process. Sure, if you take our case study as an example, you could argue that dollar cost averaging crypto like BTC back in 2020 was worth it and better than in 2023. Still, the point of DCA is that you can’t really tell if it is better to jump on the BTC bandwagon today or in a year from now. If you did your research and know what crypto you’re betting on, every time should be the best time for DCA.
Dollar Cost Averaging: Wrapping It Up
DCA is a good investment strategy if you don't want to actively trade because it's stress-free, accessible and doesn't require constantly keeping up with prices or trends. It requires long-term commitment: short-term wins are close to impossible, so you should regard it as an investment made for the future. Once you set things up, it’s better not to micro-manage things: let your investment brew and HODL for years to let it make the returns you’re looking for.
