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Dollar-Cost Averaging: Crypto Investing Made Simple

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Bitcoin (BTC) gold coins in a cart with colorful chart to illustrate dollar-cost averaging strategy

Want to invest in crypto assets but not too sure on how to go about it? Well, dollar-cost averaging may be a strategy to consider. Most passive investors find this strategy beneficial, some even went as far as to claim that “Even God couldn’t beat dollar cost averaging”. In this article, I’ll walk you through the key pros and cons about dollar-cost averaging and how you can create your very own dollar-cost averaging strategy with Easy Crypto’s auto-buy feature.

What is dollar-cost averaging?

Dollar-cost averaging is the strategy of spreading out your crypto investment purchases; buying at regular intervals and in roughly equal amounts. When it is done properly, your portfolio can reap significant benefits.

This is because dollar-cost averaging “smooths” your purchase prices over a period of time. By doing so, you ensure that you are not dumping all of your money in at a given price or any point of time; just in case you bought it at a high price point.

Dollar-cost averaging can be especially powerful in a time where the market is uncertain – kind of what’s going on now in the world! This means you may even be buying when other investors are too afraid to buy, so there’s a good chance you’ll be “buying the dips”. Committing to such a strategy means that whether the market is good or bad, the average price you pay for your investment in general helps you to score a pretty good deal.

Why bother dollar-cost averaging when you can buy the dip?

Although buying the dips seems logical, that is buying at a bottom price so that one is always investing at a relatively cheap price, this may not necessarily always be the case. This is because one can never truly know when the market has “bottomed out”, and even so, it is not often we see huge market retracements.

A businessman is doing an analysis on business reports to illustrate dollar-cost averaging example

While March 2020 the market saw a sharp decline, the last time the global market witnessed such a drop was in 2008, and prior to that the 2000s dot com bubble. In the case of cryptocurrencies, the market is relatively young and volatile, and it is almost certainly impossible to time the market. As a result, if you try to time the market, you may end up losing out on buying opportunities, which ends up worse for your investment portfolio.

Why does dollar-cost averaging work?

Dollar-cost averaging provides three key benefits that can result in consistent returns. This is because it helps you to:

  • Avoid mis-timing the market
  • Take emotion out of investing
  • Think longer-term

Dollar-cost averaging therefore saves you from your psychological biases. Investors, professional or not, are still human, and we are prone to making emotional decisions and market gyrates which render us vulnerable to our fear and greed.

Dollar-cost averaging helps to minimise such errors and mistakes, allowing us to concentrate on the long term growth of our crypto investments. As previously mentioned in our tips and trick for crypto investment, using the beauty of time and compound interest, having a strategy where one adds consistently to their allows one fully maximise the gains while reducing risks.

While you are not buying all at once when pieces are at the bottom, the same logic goes that you are definitely not buying all at once when prices are at the highest.

The possible drawback

Like all investment strategies, each and every strategy has its own pros and cons, and the same goes for dollar-cost averaging. The main drawback of dollar-cost averaging is that despite doing so, investment returns are still not guaranteed. However, the trade-off between risk and return with dollar-cost averaging means that one can still anticipate a conservative and modest return.

The illustration of risk management in dollar-cost averaging strategy

Dollar-cost averaging using Easy Crypto’s Auto-Buy

With little legwork up front, you can start to dollar cost average with Easy Crypto’s auto-buy feature. Setting an auto-buy is straight forward!

In fact at Easy Crypto, you have the option to set multiple auto buys. For example, one can perhaps have an auto-buy set on a weekly or fortnightly basis coming on from your pay cheque as part of your long term savings. Or you can set a different auto-buy on a monthly basis for occasions such as Christmas or Birthdays.

To set up an auto-buy, log into your Easy Crypto account and click onto the “Account tab”.

  1. Find the “Auto-Buy” option

    You will be able to see “Auto-Buy” as the first option on your drop-down menu:

    The Auto-Buy option from Easy Crypto to start your dollar-cost averaging strategy

  2. Click onto “Auto-Buy”

    You will then see an option to “Create new order”:

    The option to create new order in Easy Crypto's Auto-Buy option

  3. Add your preferred cryptocurrencies

    Please bear in mind there is a minimum amount for our auto-buy. But, this can be weekly, fortnightly or monthly – it’s up to you!

    Choose your preferred cryptocurrencies in Easy Crypto's Auto-Buy option

  4. You can play around with the components of your auto-buy

    When you are happy with the ‘make-up’ of your auto-buy, you can add the wallet address(es) for your crypto assets. Please copy and paste your address(es) to avoid mistakes. Please also double-check to ensure that the provided address is correct.

    Confirm your cryptocurrency wallet address in Easy Crypto's Auto-Buy feature

  5. Confirm your auto-buy order

    Once you have set-up your wallet address, you can go ahead to confirm your auto-buy order. You will then be provided with instruction on “How to pay” for your auto-buy:
    Confirm your payment method to complete the Auto-Buy order

When you click onto the “How to pay” option, you will be provided with our bank account details and a unique reference number. You may set up an automatic payment from your bank account to fund your auto-buy order. Please check the payment details.

Our auto-buy feature is flexible, and this means you can make changes to your order by clicking onto the “Edit” option. You can also increase or decrease your auto-buy amount, or stop this order at any time.

With all of that background, the big question is this: should you dollar-cost average or invest your money all at once? Here’s my take:

The most important thing, by far, is to save money and stay invested for the long term. If dollar-cost averaging helps you do that with less anxiety, then go for it.

Disclaimer: This article is for informational purposes only. It is not financial advice, please do your own due diligence before investing.

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