Lucile Tomlinson, author of the book Useful Formulas for Successful Investing, says: “No one has yet discovered a more robust strategy than averaging.”

The Dollar Cost Averaging (DCA) strategy comes from the stock market. It is a systematic investment approach where a fixed amount is regularly invested in an asset, regardless of its price.

For a novice in crypto-assets, this strategy offers several advantages. First, it helps mitigate the effects of market volatility, as it allows you to buy both when prices are high and when they are low, thus reducing the risk of buying at the peak of the market. Moreover, DCA encourages long-term investment discipline by prompting you to maintain a consistent commitment over an extended period, which can be beneficial for the growth of your portfolio.

However, this strategy also has its limitations. It does not necessarily guarantee optimal returns and may not be suitable for all market conditions. Additionally, it requires a certain consistency in investments, which may not be convenient for all investors.

Let’s take the example of an investor who applies the DCA strategy by investing 100 euros per month in Bitcoin over a five-year period, from 2019 to 2023. Regardless of the price, the investor consistently invests 100 euros each month in Bitcoin.

As a result, the investor would have purchased more Bitcoin when prices were low (an average of 7,000 dollars) in 2019 and 2020, leading to a lower average cost per Bitcoin. Conversely, they would have purchased less Bitcoin when prices were high (an average of 44,000 dollars) in 2021 and 2022, thereby limiting potential losses. Over time, this approach would likely have allowed the investor to achieve more stable gains and mitigate market fluctuations…

This text is an excerpt from the book INVESTING IN CRYPTOCURRENCIES written by Eudes Djembo.

We invite you to read the following article: “THE BASICS OF BLOCKCHAIN TECHNOLOGY.”