Dollar cost averaging Bitcoin pros and cons

Dollar cost averaging bitcoin
There is no one size fits all strategy when it comes to investing into Bitcoin and alt coins. Even though dollar cost averaging Bitcoin has shown to be extremely effective over long periods (4+ years), it has its downsides. If you can time the market (a.k.a. if you have a crystal ball), then lump sump investing will beat DCA-ing any day.

To get an idea of what the ROI of dollar cost averaging Bitcoin would be with different amounts and time periods, check out this Bitcoin DCA calculator.

Before we go any further, it's important to understand what dollar cost averaging (DCA) Bitcoin versus lump sum investment actually mean. Dollar cost averaging is an investment strategy to buy a specific amount of Bitcoin (or any crypto currency) at regular intervals. For example, buying $10 of Bitcoin every Monday at 1pm. 

Lump sum investing is buying as much Bitcoin as you can, with all of the money you have available to invest. 

ZenDCA does not provide any financial advice, but some key principles of the crypto space have been:
  • Never invest more than you can afford to lose. If losing 100% of the amount you invested terrifies you, you've invested too much.
  • Don't keep your Bitcoin and crypto currencies on exchanges. Always transfer to a hardware wallet or any other cold storage to keep them offline. Not your keys, not your coins.
  • Do your own research. If you're new to the space, "The Bitcoin Standard" is a good book to start with.  Don't listen to people who say they know it all and have it figured out, do your due diligence instead.

Pros and cons of dollar cost averaging Bitcoin

  1. A tried and true long term investment strategy, without trying to time the market
  2. Takes the emotions out of the equation, as you're not stuck watching one specific price
  3. Easier to average down your cost during bear markets and avoid panic selling
  4. Easy to automate, no technical analysis or expert advice needed to get started

  1. Missed out on potential gains during bull runs, since you're regularly investing small amounts instead of one lump sum
  2. Assumes a low time preference, so for day traders or anyone not willing to continue for 4+ years, not a worthwhile strategy.

Of course with a lump sum investment, you could stand to earn a lot more money if you can time the market. That's a big if, and while many have tried, most have failed. So it might be easier to regularly invest a small amount, automate your strategy and find some Zen.