Crypto glossary
DCA (dollar-cost averaging)
DCA, or dollar-cost averaging, is an investing strategy of buying a fixed amount of an asset at regular intervals, regardless of its price at the time.
Instead of investing a lump sum at once, a DCA investor splits the money into equal purchases, for example every week or every month. When prices are low, the fixed amount buys more units; when prices are high, it buys fewer. Over time, the average cost per unit smooths out.
The main appeal is that it removes the need to time the market and reduces the emotional pressure of deciding when to buy. Most large exchanges offer recurring buy features that automate the process.
DCA does not eliminate risk. If an asset falls steadily for years, a DCA investor still loses money, and in a market that rises consistently a single early purchase would have performed better. Trading fees on many small buys can also add up.
Example
An investor buys $100 of bitcoin on the first day of every month for a year. Some months the price is high and some months low, so the $1,200 invested ends up at an average price between the year's peaks and troughs.
