DCA Crypto: The Complete 2024 Guide
Key points:
- The crypto DCA makes it possible to smooth out market fluctuations
- This strategy is attractive for long-term investors
- It mitigates the risks associated with the volatility of cryptoassets.
Definition of crypto DCA
DCA crypto, or dollar cost averaging applied to cryptocurrencies, is an investment strategy that involves the regular purchase of digital assets, such as bitcoin, Ethereum and other cryptocurrencies. This method aims to reduce the impact of volatility on overall investment by spreading the purchase over several periods of time.
The main objective of the DCA strategy is to allow investors to gradually acquire cryptocurrencies without having to predict market fluctuations. Thus, the investor makes recurring purchases at regular intervals, regardless of the asset price at that time.
The establishment of a crypto investment plan can facilitate the implementation of this strategy. Indeed, this allows the investor to determine in advance the amount and frequency of purchases, which facilitates the management of his portfolio.
How does DCA Crypto work?
DCA (Dollar-Cost Averaging) is an investment strategy that consists of invest fixed amounts in cryptocurrencies to regular intervals, rather than investing an amount all at once. This method makes it possible to reduce the risks associated with the volatility of the cryptocurrency market by spreading investments over a longer period of time.
One of the main advantages of the DCA crypto method is that it allows you to obtain An average purchase price rather than trying to buy at the best time. Thus, investors can take advantage of price fluctuations to increase returns without having to predict market movements. This approach is especially useful for investors who don't want to spend a lot of time monitoring the market and trying to figure out the right time to buy.
To implement this investment strategy, it is essential to determine the regular intervals at which you want to invest, whether on a daily basis, weekly or Monthly. Once you have decided on your investment schedule, you can use a Inve platformSAllocation to make automatic cryptocurrency purchases at these intervals.
Here is a tableau DCA which shows the implementation of this strategy and the expected results:
DateInvestmentBTC Price (€) Fluctuation M+1 Total Value (€) Total Value (€) July 2022100 €19.926.6 €16.95 %100 €23.303.4 €-13.99 %216.95 €Seven 2022100 €Seven 2022100 €20.049.9 €20.049.9 €20.049.9 €20.049.9 €-€20.049.9 €-3.094.9 €-3.10 %9 €-3.10 %287.91 €287.91 €Oct 2022100 €19.422.9 €19.422.9 €379.81 €Nov 2022100 €20.496.1 €20.496.1 €20.496.1 €20.496.1 €-3.096.9 €-3.10 %4 €99.34 Dec 2022100 €17.163.4 €-3.65% -3.65% 582.08 €Jan 2023100 €2023100 €17.163.4 €-3.163.4 €-3.124.7 €0.02% 948.26 €Mar 20238.26 €Mar 20238.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 €Mar 2023100 €48.26 100 €29.252.1 -6.96% 1 391.11 €June 2023100 €27.216.4 €11.97% 1 484.15 €July 2023100 €30.472.9 €30.472.9 €-4.072.9 €-4.07% 1 660.12 €Bitcoin DCA chart
- Total investment : €100 x 13 months = €1,300
- Final total value : €1,660.12
- Added value in value : €160.12 − €1300 = €360.12
- Increase in value as a percentage : (€360.12/€1300) × 100 = 27.70%
So by following this DCA strategy:
- Your final total value would be 1 660.12€.
- Your added value would be 360.12€, which represents an increase of 27.70% compared to your initial investment without having spent hours predicting the Bitcoin price.
How to invest using the DCA method?
First step - selecting an exchange platform adapted to the DCA
To begin with, it is essential to choose a cryptocurrency exchange platform that is suitable for the DCA. The best platforms for this type of investment offer low transaction fees and an easy to use interface. You can find secure platforms and with relatively low fees to do DCA on cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).
Finary PlusRevolutCoinBaseTrade RepublicSwissBorgBinanceDCA fees0.99%1.49% 2.99% 0% 1% 0.20% Asset Price (BTC/EUR)+0.00% +1.21% +1.02% +1.09% +0.05% +0.24%SEPA feesGratuitFree Free Free Free €1 Instant RechargeGratuit
(SEPA instant)Gratuit
(instant SEPA) 3.99% 1%
(Google Pay) 2.25%
(Credit card) 1.8%
(Credit card) Crypto transfer ✅❌✅❌✅✅ Registered by the AMF ✅❌❌✅✅✅ Head Office 🇫🇷🇬🇧🇺🇸🇩🇪🇨🇭❌ Finary offers DCA crypto investment, with extremely competitive fees.
Step two - complete the verification process (KYC)
Once you have selected a exchange platform, you need to verify your identity. This process, called “Know Your Customer” (KYC), is required by the majority of exchange platforms to ensure that users comply with local and international regulations on the management of cryptocurrencies. The KYC process may include verifying your email address, providing identification, and sometimes verifying your physical address.
On Finary the process is completed in just a few minutes.
Step three - proceed with the purchase of cryptos
After completing the verification process (KYC), you can start investing using the DCA method. To do this, you must determine the amount you want to invest with each purchase and the frequency of these purchases (for example, every month). Then, simply make cryptocurrency purchases according to the schedule and the amounts defined, making sure to respect the regularity to take advantage of the DCA method.
On Finary you have the choice to make your own DCA investment plan, or choose from the various collections:
- BTC + ETH (the best way to start in crypto)
- Green (sustainable proof-of-stake blockchains)
- Defi (investing in decentralized finance)
- Layer 1 & Layer 2 (Investing in fundamental blockchains)
When and how should you use the DCA strategy?
To set up a DCA strategy, you must first select a cryptocurrency to invest in. For example, the bitcoin or Ethereum are popular options due to their large market capitalization and widespread adoption. Once you have chosen a cryptocurrency, it is important to determine how often you want to invest (weekly, monthly, etc.) and the amount of each investment.
The use of the DCA strategy is based on the discipline and regularity. It is essential to strictly stick to the planned investment schedule and amounts, even if the market is changing rapidly or has significant fluctuations. This approach thus makes it possible to avoid impulsive investments and to remain objective in the face of market movements.
It is also possible to combine the DCA strategy with other investment methods, such as technical analysis Or lfundamental analysis. For example, you can adapt the amounts invested based on market signals or economic events. This reinforces the strategy and maximizes potential returns.
What are the best types of cryptos for DCA?
Bitcoin (BTC) is often considered to be the first choice for a DCA strategy due to its dominant position in the cryptocurrency market. Being the first and largest cryptocurrency in terms of market capitalization, Bitcoin is often seen as a safer and more stable investment than other digital assets.
Ethereum (ETH) is another popular option for DCA due to its smart contract platform and its position as the second largest cryptocurrency by market capitalization. Its constantly evolving ecosystem, which includes DeFi projects, makes it attractive for investors.
Polkadot (DOT) is a promising cryptocurrency that aims to connect different blockchain networks, creating a decentralized and interoperable ecosystem. Its innovative technology and growth potential make it an interesting choice for a DCA strategy.
Les Stablecoins suchlike USDC also offer an option for investors who want exposure to cryptocurrencies with less volatility. These assets are generally pegged to a fiat currency, which gives them relative stability compared to other cryptocurrencies.
Finally, some alternative currencies like Shiba Inu (SHIB) have attracted the attention of investors due to their rapid growth and popularity. However, it's important to note that these assets are often more volatile and have higher risks than established cryptocurrencies.
Finally, it is crucial to Understand the cryptocurrency market and to adapt its DCA strategy according to its objectives and its risk appetite. It is recommended to diversify your investment portfolio by including several types of cryptocurrencies to take advantage of opportunities and mitigate risks.
The strengths of DCA in crypto
Simply invest
DCA (Dollar Cost Averaging) in crypto allows investors to simplify their investments in cryptocurrencies. By applying this strategy, investors regularly buy digital assets, such as Bitcoin or Ethereum, at fixed intervals and in fixed amounts. In this way, they do not need to constantly monitor market fluctuations or do a lot of analysis to determine the best time to invest. Since this approach involves investing gradually over a longer period of time, it can help investors to generate interest on their cryptocurrencies.
Protect yourself against crypto market volatility
Volatility of the cryptocurrency market is a major challenge for investors looking to make short-term profits. However, DCA in crypto makes it possible to minimize the effects of this volatility. By investing small amounts regularly, investors spread their purchases over time, allowing them to take advantage of market fluctuations without incurring significant losses due to sudden price drops.
Aim for long-term profitability
DCA in crypto can also be an effective strategy for aim for long-term profits. Instead of focusing on quick wins, investors using this method are looking to take advantage of the global cryptocurrency market growth trend. By buying digital assets regularly over time, they can take advantage of long-term market developments while mitigating the risks of investing in a volatile market. This patient and disciplined approach can generate solid profits over the long term, contributing to the overall profitability of investing in crypto.
The disadvantages of DCA Crypto
Potentially higher costs
One of the concerns associated with the DCA (Dollar-Cost Averaging) strategy in the field of cryptocurrencies is the possibility of higher costs. Indeed, by buying cryptocurrencies on a regular basis, transaction fees And the commissions can add up, increasing the total cost of the investment. In addition, it is important to take into account the fees associated with exchange platforms, which may vary depending on transaction volumes and the cryptocurrencies chosen.
It is therefore essential for investors to Analyze the costs associated with crypto DCA and to compare these costs with those of other investment strategies, such as buying at once (lump-sum investment) or active portfolio management.
Lower profitability compared to other methods
Another concern about the DCA crypto strategy is the possibility of lower profitability compared to other investment methods. Indeed, the DCA implies to buy cryptocurrencies regularly, regardless of the market level, which can lead to purchases when prices are high. As a result, the return on investment may be lower than that obtained with other strategies, which seek to optimize market entry, buying at more convenient times.
However, it is important to note that the DCA crypto strategy aims to reduce risks in spreading purchases over a longer period, thus limiting exposure to short-term market fluctuations. This approach can be particularly attractive for investors who want to adopt a more cautious and long-term perspective, rather than trying to anticipate short-term market movements, which can be difficult or even impossible.
What is DCA cryptocurrency investment? DCA (Dollar Cost Averaging) cryptocurrency investment is an investment strategy that involves regularly investing a fixed amount in cryptocurrencies, regardless of their current market value. This approach makes it possible to reduce the risks associated with price fluctuations and to obtain an average purchase price over the long term.
The main benefit of DCA investing in cryptocurrency is that it prevents investors from falling into the trap of impulse buying during price spikes. Instead, the DCA strategy encourages a disciplined and methodical approach to accumulating digital assets over an extended period of time.
How to set up a DCA strategy for cryptos? To set up a DCA strategy for cryptocurrencies, follow these steps:
Choose one or more cryptocurrencies to invest in. It's best to focus on cryptocurrencies with a high market capitalization and solid adoption, like Bitcoin or Ethereum.
Determine the amount and frequency of investment: for example, €50 every month. Adjust these numbers according to your budget and your risk tolerance.
Select a method of purchase: some cryptocurrency exchange platforms, such as Coinbase, allow you to program automated recurring purchases.
Implement a risk management strategy: for example, monitor regulatory announcements and cryptocurrency news to stay informed of market developments and adapt your strategy if necessary.
How to track and manage your crypto portfolio in DCA? To effectively track and manage your crypto portfolio in DCA, here are some tips:
Use a portfolio tracking tool: applications like Finary allow you to follow the evolution of your cryptocurrency portfolio on various exchange platforms.
Update your portfolio regularly: adjust the amounts invested and the cryptocurrencies chosen if necessary, according to market developments and your overall investment strategy.
Keep your cryptocurrencies safe: use physical wallets (Hardware Wallets) such as Ledger or Trezor to store your private keys and protect your assets from online attacks.
Stay up to date: follow the latest news from the cryptocurrency sector and financial markets to be able to adapt your strategy in the event of major changes.
