Dollar-cost averaging (or DCA) involves spending equal amounts of money at regular intervals, no matter how the cryptocurrency is performing at the time.
For instance, you may split $12,000 into 12 once-a-month purchases of $1,000. Simply put, DCA offers a long-term strategy for buying crypto by reducing the effects of volatility. Therefore, DCA is better suited for an active trading approach.
Dollar-cost Averaging makes the most sense when you want to consistently buy cryptocurrency over time while maintaining a low-tolerance for risk.
But is Dollar-cost averaging a good strategy?
DCA has pros and cons.
Dollar-cost averaging enables you to:
- Even out your purchases. You end up buying more crypto when prices are falling and less when prices are rising.
- Make buying easier. When you spread out your purchases over a certain period, you’re allocating less money per day, week, or month than if you make one lump-sum transaction. Therefore, you can treat buying crypto more like paying your monthly bills.
- Add discipline to purchasing. DCA lets you resist the temptation to “time the market,” which can expose you to greater market volatility.
DCA isn’t without its downsides, though. Some cons:
- More fees. Since you’re buying crypto more frequently, you’ll likely end up paying more fees than if you make one lump-sum purchase - luckily Binance.US has some of the lowest fees in America!
- Lower returns. In some cases, DCA may result in lower returns than buying with a lump-sum. That’s because $6,000 all at once will enjoy a better chance to generate gains than if the same $6,000 were spread out over a 12-month span.
- Market fluctuations. Sticking to a DCA approach may leave you out of the loop if you want to jump on advantageous shifts in the market.
To practice DCA in the most cost-effective manner, pay attention to trading fees, and minimize purchases and sales.
A quick example of Dollar-Cost Averaging
When applying DCA to buying Bitcoin, you buy a small, recurring amount of the cryptocurrency over time.
Binance.US enables you to make recurring purchases on a daily, weekly, bi-weekly or monthly basis. You can do this by logging in to or registering for a Binance.US account, and then clicking on Recurring Buy under the Buy Crypto tab in the navigation bar.
You can also set up recurring buys on the Binance.US mobile app. Log in or register your Binance.US account and click the “Buy Crypto” button at the top of your screen. First, choose the coin you want to buy by tapping the cryptocurrency of your choice. Type in the amount you would like to buy.
If you would like to toggle the buying options, simply click the circular arrows in the top right corner. Next, tap the arrow icon to display the recurring options. Set the frequency that you would like (Daily, Weekly, Bi-Weekly, Monthly), choose your payment method, and finally click the Preview Purchase button. Preview the details of your recurring buy and if all looks good, click the Confirm Purchase button to submit your purchase. Please note that confirming will place your first order immediately and your subsequent recurring purchases will take place at the selected cadence.
Visit our guide, and start Dollar-Cost averaging on Binance.US today!
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