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What is DCA

Dollar Cost Averaging

What is DCA = Dollar Cost Averaging to Cryptocurrency Ownership

Investing in cryptocurrency can be a highly lucrative affair if done right. Over the years, individuals have made away with thousands and millions of dollars from trades. However, you have to work the odds in your favor.

One critical question that beats both pros and beginners is when the right time to invest is.

While these digital assets promise huge returns, they are prone to high risk and volatility. Trying to predict the cryptocurrency markets can be daunting. You’ll either invest too early, too late, or get too invested in analysis and avoid investing altogether.

Cryptocurrency is no guessing game. You have to use reliable strategies if you want to make any significant profits. One tried and tested strategy you can use to boost your success rate is dollar-cost averaging (DCA).

In this article, we discuss what dollar-cost averaging is, its advantages over lump-sum investing, and how to use it in crypto investment.

What Is Dollar-Cost Averaging?

How do you prefer to invest your money? For short periods or over a long time?

If you are a long-term investor, dollar-cost averaging is perfect for you. It is a slow and steady approach that focuses on benefits over time.

DCA involves making small regular investments into your portfolio. This way, you don’t have to worry about the unpredictable daily and weekly ups and downs. For example, if you plan to invest $1200 yearly, you could spread the contributions to $120 each month.

The strategy revolves around the belief that the asset in focus will appreciate over time. Thus, you’ll invest and contribute to the portfolio even when the market value drops. The aim is to leverage the upward trend in value.

In summary, with DCA, you buy at both highs and lows. If the price drops during this time, you get better chances of profiting more when the price jumps back up.

DCA vs. Lump Sum Investing

DCA is not the only way you can invest in an asset or market. Traditionally, investors would buy into a market once when it favors them. They’ll spectate, and when the opportunity they deem ripe comes, they put in all they planned to invest.

This one-time payment in full to investing is called lump-sum investing.

Both lump sum and dollar-cost averaging have advantages and different characteristics.

DCA involves splitting the investment across time, while lump-sum involves contributing the whole sum into your portfolio, and only buying in when the timing is right.

How Does Dollar-Costing Work for Cryptocurrency Investing?

As we have established, DCA involves investing in an asset over time rather than once. But how does it work in cryptocurrency investment?

If you have followed the trend for top cryptocurrencies, you know that the markets are very volatile. The price of coins could shift by thousands within hours. Therefore, predicting such trends and putting in a considerable sum at low times could be costly.

It is easy for your emotions to get in the way of your decision-making. The fear of losing your investment in the rapid ups and downs could make you buy or sell at the wrong time, leading to losses.

The good news, however, is that the value of coins like Bitcoin and Ethereum have been increasing over the years. And since dollar-cost averaging works best for long-term investments, it is perfect for cryptocurrency trading.

You’ll avoid buying into the hype and selling when the coin’s value dips, forgetting that it could rise again at the end. Investing at the low moments guarantees a good profit when the value appreciates again.

How to Use DCA for Cryptocurrency Investment

Investment is a matter of personal choice and preference. However, putting all your eggs in a single basket is not advisable. It is good to spread your investments across different assets. For cryptocurrency, the recommended amount is 5% of your portfolio.

You can take the following steps to use DCA for your crypto investing.

  1. Decide how much you want to invest in cryptocurrency.
  2. Look for top-performing coins. They should have a steady growth track record with a high market cap and trading volume. We recommend Kraken and Coinbase as trusted exchanges to buy and sell crypto.
  3. Choose an interval at which you will make investments. For example, it could be weekly or monthly.
  4. Start buying your coins. You could increase the investment amount over time.
Incorporate Systems into your Crypto Investment

Making a crypto investment could yield huge profits. The most important thing is to get a good strategy like dollar-cost averaging, choose a coin, and make your investment.

If you decide to use DCA, you could incorporate systems to automate your trading and allow you to sell at just the right moment, maximizing your profit.

CurPay is an AI that lets you automate your trading strategy, allowing you to take advantage of the volatility the market provides. The system will provide trading features and monitor the jumps and drops in your coins, allowing you to make your trades at just the right time.

With state-of-the-art AI Volatility Protection and everything else you need to customize the perfect trading strategy, CurPay is like having a financial advisor in your corner 24/7. So, If you are ready to start trading crypto, then be sure to check out CurPay today.

There’s a lot of noise in the stock market every single day. New and seasoned investors alike need help filtering the news, data points and catalysts that are relevant to them. This is where it’s helpful to implement our VipLiveAlerts-Pro notification network to help you responsibly manage your assets and stay aware of changes that might affect your portfolios.

Disclaimer: This content is only intended for informational purposes. Before making any investment, you should always do your own research and analysis.
 
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