Beginner’s Guide to Investing in Cryptocurrencies using Dollar Cost Averaging (DCA)
16 September 2020 | ZebPay Trade-Desk
Dollar Cost Averaging (DCA) is an investment strategy in which an investor divides a certain amount of money to be invested over a period of time. This helps to reduce the impact of volatility on the overall purchase, but also helps protect liquidity for the investor. The purchases occur irrespective of the underlying asset’s price, and at regular intervals.
The DCA method assumes that the price of an attractive asset will continue to rise, hence postulating that to benefit from significant ROI appreciation, one must invest in a timely manner over extended periods of time.
The two most popular assets today are Bitcoin and Ethereum. Let’s first understand what each of these are, and then use some examples to understand how the DCA investment strategy could help an investor build wealth, assuming they were to use it to invest in these two assets.
Bitcoin (BTC)
The Bitcoin Network is the first successful implementation of blockchain technology. The blockchain network is not centrally controlled by a bank, corporation, or government, which means that the blockchain technology on which Bitcoin operates has several advantages. More user autonomy, better accessibility, elimination of banking fees, peer to peer focus, very low transaction fees, low cost of trading, low deposit amounts, no global boundaries, and an exceptionally secure environment to transact are a few of the unique advantages.
