Remember back in 2018 when Bitcoin crashed from an all-time high of $20,000 down to $7,000?
If you use the DCA investment strategy with your cryptocurrency, you probably don’t!
You may be wondering, “What is DCA in crypto?”
DCA crypto is a strategy used by long-term investors to minimize the risk associated with investing in a security or portfolio.
When you DCA crypto, you purchase a fixed amount of crypto, regardless of the token’s price or the market conditions, at regular time intervals. The purpose is to smooth out the fluctuations in price that are often associated with volatile market swings.
Interested in learning more? Keep reading to learn how to get started with the DCA strategy and if it’s the right one for you.
Figure Out How Much You Want to Invest
First, you need to calculate the budget for your crypto investment.
Different factors come into play when determining this, such as:
- Asking yourself how much money you’re willing to lose if the coin price drops suddenly
- Choosing a comfortable percentage of your income to invest
Remember the golden rule of DCA in crypto investing: never invest more than you’re willing to lose!
Divide Your Investment Into Several Parts
With your new budget in hand, now you need to figure out when to purchase on an exchange.
Many investors use a popular tool like a crypto DCA calculator for this step.
Some investors buy every day, some on a certain day every week or month. Looking at your finances (when your employer pays you and when you typically have bills due) can help you make this decision easier.
Invest Your Money Over Time
Now it’s time to make the purchase and start investing.
Many investors will use a variety of popular exchanges and take hold of the reins themselves. This gives them the freedom to use the DCA strategy as they see fit.
Many use a Crypto OTC to manage their investment. OTC stands for over-the-counter, and it’s a type of service that offers more privacy since the transactions take place off the popular crypto exchanges
Monitor Your DCA Crypto Strategy
Now that you’ve got your DCA game plan in place, you can sit back and watch your investment grow!
If you choose to use an exchange, there will always be a convenient dashboard with live updates on the status of your crypto portfolio.
An OTC will deliver a detailed report on your investment with information such as when the buy order took place and at what price-point the asset was when it was acquired.
Minimize Your Risk
When you DCA crypto, you’re making a safe bet when investing in the market.
Because you took the time to budget, plan your purchase time intervals, and didn’t invest more than you’re willing to lose, you can sit back and watch as your investment grows, even if the market takes a big swing.
Join the growing flock of educated cryptocurrency investors and give DCA a try!
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