Dollar Cost Averaging is basically a way to minimize variance and luck when investing in an asset. Instead of trying to time the top or bottom of the market, you pick a regular interval at which you will invest $x money and buy the asset, with a view to hold very long term.
You might miss buying the total bottom, and you sometimes might buy a local top, but, on average, you will buy at reasonable prices and accumulate a reasonable stack of the asset.
It is basically taking the guesswork out of the equation and admitting to yourself that you don’t have the skills or the time to “beat the market”.
Here’s the strategy: on the 1st of every month (or 1st and 15th, etc) you take $100 or $500 or $10,000 of your money (depending on where you are in life) and buy an allocation of the crypto assets you have the most conviction in. For most people, this will be BTC and ETH. Perhaps you have a lot of conviction in Solana, or Optimism, or Link. That’s fine, that’s great. Buy a bit every month, and forget about it.
That’s it.
This chart explains it nicely:
I know this is unexciting. I know this isn’t the flashy “omg I’m gonna retire from crypto in a few months” dream that many wish for from crypto. But it’s reality, and in reality, often the most boring strategy is the most optimum one.
To take it a little bit further, you could begin to slowly increase your DCA amounts when you have a strong sense that the market might be turning bullish, and being to decrease your DCA amounts when you have a strong sense that the market might be turning bearish (or even start DCA selling out of your positions).
DCAing is a concept you should get familiar with. Even if you’re going to be a trader, you will at many points in time want to employ a DCA strategy going into/out of individual assets, usually on a much shorter time scale (ie buying a bit of a token every day for a week, then when you think it has gone up a sufficient amount, starting to ladder-sell out of your position).
Next up.. ⤵️