Crypto Glossary

Posted on September 13, 2021 in
Glossary

DCA (dollar-cost averaging)

DCA stands for Dollar-cost Averaging. In the cryptocurrency market, it is a very popular investment strategy where investors don’t invest large sums of money in their budget all at once, but rather put money into cryptocurrency little by little

DCA

In this investment strategy, an investor-only puts small increments of his money into his portfolio over time. This allows the investor to take full advantage of the uncertainty of the market while potentially saving costs. 

When the assets are more expensive, the money that the investor puts in every month will be able to acquire fewer assets; however, when the value of the digital assets goes into a downturn, he will have more purchasing power while spending the same amount.

Getting started with DCA

When getting started with the Dollar-cost averaging investment strategy, you will need to set a budget that you would like to invest in. This budget refers to the total amount that you are willing to spend on your investment journey. Upon setting your total budget, you will need to choose the product or cryptocurrency that you will be putting your money into. You then invest in equal instalments over time. It will allow you to automate your regular investments without having to spend a lump sum all at once. 

Commitment to the DCA strategy

Committing to the dollar-cost averaging strategy can mean that, sometimes, you will have to be splashing out on a certain asset in the market even when that asset’s value has plummeted. It can be considered a risk that you will have to take since there might be some times where the value of a digital asset is undergoing a market sell-off but you will still have to invest your regular amount in it.

However, if we take a look at another perspective, this could be an opportunity where investors can sell off those assets at a much higher price with a great return on investment once the value goes up again.

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