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Dollar-cost averaging bitcoin has become an incredibly popular way to invest in the world’s leading digital currency. Read on to learn about Bitcoin DCA, how it works, and why it has become popular among investors.
This is partner content sourced from Laura Shin’s Unchained and published by CoinDesk.
What Is Bitcoin Dollar-Cost Averaging?
Dollar-cost averaging bitcoin, also called Bitcoin DCA, is an investment strategy where you buy a fixed amount of BTC at regular intervals, no matter the price.
You can set up a specific amount of money to invest periodically, such as weekly or monthly, and stick to this schedule over time. This means you reduce the impact of short-term market volatility, as the specified amount buys more BTC when prices are low and less when prices are high, ultimately averaging out the cost per BTC. Hence, the term cost-averaging.
The result is a disciplined and low-stress investment approach. By removing the need to make decisions based on short-term price movements (i.e., trying to time the market), you can alleviate emotional reactions to market movements while growing your bitcoin investment over time.
How Does Bitcoin DCA Work?
Now, let’s take a look at how you can dollar-cost average bitcoin. Here’s how it works.
- Set a budget: First, figure out how much you’re comfortable investing regularly. Some bitcoin savings apps allow you to start with as little as $10, but it’s entirely up to you how much you want to invest in the digital currency every week or month.
- Decide on the intervals: It could be every week, bi-weekly, or once a month. Again, it’s totally up to you.
- Find a good platform: You need a place to buy your BTC. So, find a reputable bitcoin exchange or app that allows you to automatically save in bitcoin using recurring payments. Examples of popular Bitcoin DCA apps include Swan (US), Relai (Europe), and Bitnob (Africa).
- Start stacking sats: Once you have registered for a Bitcoin DCA platform, set up regular bank transfers, and the app purchases bitcoin for you automatically at regular intervals based on the predetermined settings you have decided.
- Keep calm, stack, and HODL: As your Bitcoin savings app regularly buys bitcoin for you, make sure the bitcoin wallet you use is a secure, non-custodial wallet (a wallet where only you have access to the private keys) to ensure you can “HODL” your bitcoin investment safely for the long-term.
Why Is “Stacking Sats” With Bitcoin DCA So Popular?
Stacking sats is Bitcoin community jargon that refers to buying small amounts of bitcoin. Sats is short for satoshis, the smallest denomination of bitcoin. One satoshi is one hundred millionth of one bitcoin.
- Anyone can do it: Dollar-cost averaging bitcoin is pretty straightforward and easy to understand. You don’t need extensive financial or cryptocurrency expertise to get started.
- No need to attempt to time the market: Trying to buy (or sell) just at the right time is almost impossible. That is the case for professionals and as well newcomers. So instead of obsessing over bitcoin price charts, auto-saving in bitcoin using dollar-cost averaging alleviates the headache and stress of figuring out the right time to buy.
- Stay cool, emotionally: By automatically saving in bitcoin, you can prevent yourself from panic buying or panic selling due to market volatility. If regularly investing in bitcoin for the long term is part of your investment strategy, then you can set it and forget it and don’t need to check the price of bitcoin every day.
- Start small, dream big: Bitcoin dollar-cost averaging allows you to build your bitcoin investment over time, even if you only have a small amount of money available to invest. If you continue to stack sats for several years, your small weekly or monthly bitcoin purchases can grow into sizable bitcoin savings.
Bitcoin DCA is an easy and simple way to invest in BTC without stressing over short-term price movements. Moreover, it allows anyone (even those with small investment capital) to start investing in the world’s leading digital asset.
But remember, investing in BTC has its risks, and you shouldn’t invest all your savings. Having said that, with a long-term investment horizon in mind, Bitcoin DCA could turn out to be a wise way to invest in bitcoin.
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