See how dollar cost averaging works. Enter a recurring investment amount, frequency, expected return, and time horizon to project your results.
Dollar cost averaging is an investment strategy where you invest a fixed dollar amount at regular intervals, regardless of the asset's price. When prices are high, your fixed amount buys fewer shares or coins. When prices are low, the same amount buys more. Over time, this smooths out the impact of volatility and results in an average cost per unit that is often lower than the average price over the same period.
DCA is one of the most popular strategies in both traditional investing and cryptocurrency. It removes the pressure of trying to "time the market" and turns investing into an automatic, disciplined habit.
Research from Vanguard found that lump sum investing outperforms DCA about 68% of the time, because markets tend to trend upward and earlier invested money has more time to grow. However, DCA has two significant advantages: it protects against the risk of investing everything right before a market crash, and it is psychologically much easier. Most people find it less stressful to invest $500/month than to put $30,000 in all at once.
DCA is especially popular in cryptocurrency because crypto markets are far more volatile than stocks. Bitcoin has historically experienced drawdowns of 50-80% during bear markets. DCA through these drawdowns means you accumulate more coins at lower prices, significantly improving your average cost basis when the market recovers. Many crypto exchanges offer automatic recurring purchases to make DCA effortless.