Dollar Cost Averaging


1. strategy

Dollar Cost Averaging (DCA) is an investment strategy where an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset's price and at regular intervals; in effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices.


For instance, an investor decides to commit $12000 to buy Bitcoin over a year. Instead of making a lump-sum purchase, the investor sets up a schedule to invest $1000 in Bitcoin at the beginning of each month, regardless of its price.

2. benefits

The main benefit of DCA is that it allows an investor to avoid making a large investment in an asset at a potentially inopportune time. Instead, by spreading out purchases, the investor can achieve an average cost per share (or coin, in the case of cryptocurrencies). This can potentially lower the total cost of acquisition, especially in volatile markets.


If the price of Bitcoin is high in one month but lower in the next, the DCA strategy ensures that the investor buys more Bitcoin when the price is low and less when the price is high, leading to a lower average cost per Bitcoin.

3. considerations

While DCA can help mitigate risks associated with price volatility, it's not always the most profitable strategy. If the price of an asset consistently rises over time, a lump-sum investment could potentially yield higher returns. However, predicting market trends with certainty is challenging, and DCA provides a more disciplined and less risky approach.


If an investor used DCA to invest in Bitcoin during a bull market, they might end up with a higher average cost per Bitcoin than if they had made a lump-sum investment at the start of the period.

4. usage

DCA is a popular strategy among long-term investors, especially for retirement accounts and 401(k) contributions. It's also commonly used in the cryptocurrency market, where price volatility is high.


Many cryptocurrency exchange platforms offer features that enable automatic periodic purchases, making it easier for users to implement a DCA strategy.

* All terms and definitions may update as the Cryptionary improves.