What is dollar cost averaging and How to make money with it on Binance?

what is dca

September 9, 2021

Reading Time: 3 minutes

How to Make Money with Dollar Cost Averaging on Binance

Dollar cost averaging (DCA) is an investment strategy native to traditional investment vehicles such as stocks. The advent of blockchain technology has led to the integration of traditional investment strategies in crypto trading. Like in the stock markets, Dollar cost averaging implies investing a fixed amount of money in a given investment vehicle such as crypto at regular intervals.

The crypto market is highly volatile and characterized by wild market swings. For instance, Bitcoin underwent positive price rallies early this year, reaching an all-time high and surpassing $60,000. Soon after the peaking of Bitcoin, a downward market correction began, lowering the Bitcoin to about $30,000 in just a few weeks.

Dollar cost averaging Bitcoin would help minimize the potential losses experienced due to the lumpsum investment on the Bitcoin while at the $60,000 mark. Investing small chunks of the money through dollar cost averaging Bitcoin at predetermined and regular intervals will eliminate losses in cases of bad timing of the entry point.

Key Features of Dollar Cost Averaging

The following features characterize dollar cost averaging as a crypto investment tool:

  1. Fixed Investment Amount

Dollar cost averaging crypto involves investing a fixed amount of money like USD in fixed installments at regular intervals. For instance, instead of investing in only one Bitcoin Unit for $40,000, the investor buys $1000 worth of Bitcoin over forty weeks.

  • Regular Investment Intervals

Dollar cost averaging crypto also entails buying the desired cryptocurrency at predetermined and regular intervals. The interval could be daily, weekly, bi-weekly, monthly, quarterly, and so forth, depending on the investors’ goal. Automated dollar cost averaging on Binance US supports daily, weekly, bi-weekly, and monthly recurring crypto buys.

Is Dollar Cost Averaging Strategy Safe to Use?

Crypto dollar cost averaging is an investment strategy suited to investors who wish to reap from crypto investment in the long term. Crypto dollar cost averaging seeks to lower the average cost of the total amount of digital assets purchased.

The example below illustrates how crypto dollar cost averaging minimizes the risk of investment.

Investor X wishes to buy $40,000 worth of Bitcoin on the Binance platform at once but does not know the point to make an entry to this trade. Assume three potential entry points as tabulated:

Investor X

Date (Potential Entry Points)Bitcoin’s Value ($)Bitcoin Units Purchased
15th January10,0004
15th February40,0001
15th March20,0002
15th April10,0001

Now, investor Y wishes to purchase $40,000 worth of Bitcoins using the dollar cost averaging strategy. Investor Y decides to buy the Bitcoin in four equal monthly installments of $10,000 as tabulated below:

Investor Y

DateBitcoin’s Value ($)The worth of Bitcoin Purchased ($)Bitcoin Units Purchased
15th January10,00010,0001
15th February40,00010,0000.25
15th March20,00010,0000.5
15th April10,00010,0001
  TOTAL   2.75 BTC

In the former case, investor Y would have purchased a total of 2.75 BTC. In the case of lumpsum buying, the investor would have bought 1 BTC on 15th February. Thus, the DCA strategy helps in leveraging investment return in the case of wild market swings.

What are the Fees for Dollar Cost Averaging?

Dollar cost averaging attracts 0.5 percent transaction fees on the Binance.US platform.

When an investor manually spot-trades crypto at regular intervals, the transaction attracts a 0.1 percent maker and taker fees.

How to Dollar Cost Average on Binance

Investors may manually spot-trade crypto on Binance on strict adherence to the set regular intervals and investment amount. However, a much easier way to dollar cost average is to use the “recurring crypto buys” feature on the Binance.US app.

Recurring crypto buys automates the process of dollar cost averaging. Investors get to choose fixed daily, weekly, bi-weekly or monthly schedules in this automated process of buying crypto on the Binance.US app.

The recurring crypto buys feature supports about twenty cryptocurrencies, including Ethereum, Bitcoin, and BNB.

There are two approaches to using the recurring crypto buys feature on Binance. An investor may use the Binance.US app or the web to activate the feature.

  1. On Binance.US App
  2. Register/Login to the app.
  3. Click the “Buy Crypto” button.
  4. Select the cryptocurrency of your choice.
  5. Type the crypto amount to purchase.
  6. Click the circular arrows to display the available buying options.
  7. Select the recurring option.
  8. Set your preferred frequency of the auto purchase.
  9. Choose payment method.
  10. Click the preview button to review the information entered in the proceeding steps above.
  11. Click the purchase button to activate the feature.
  12. On the Web
  13. Register/Login to the app.
  14. Navigate the “Buy Crypto” tab and Click “Recurring Buy.”
  15. Select your preferred frequency.
  16. Select the cryptocurrency to purchase.
  17. Choose payment method (ACH, USD balance, or debit).

A 10-day hold on the crypto applies following the purchase of cryptocurrency via ACH. A 3-day hold applies in case of a crypto purchase via debit.

  • Review the information.
  • Click the pop-up “confirm purchase” to finish the order.

In both approaches, confirming the purchase will place the investor’s first order immediately. Subsequent future purchases also initiate as per the selected frequency.

Conclusion

Dollar cost averaging on Binance aims to minimize risks associated with the wild market swings experienced in crypto trading. DCA achieves this goal by spreading the risk associated with the high volatility of crypto trading through crypto purchases at fixed amounts over regular intervals.

Visit our blogs for informative articles that educate crypto enthusiasts on the best crypto trading strategies.

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Khashaamgl
Khashaamgl
1 year ago

What happens if the market keeps getting higher?

Jeffrey Ope
Jeffrey Ope
1 year ago

Very good piece of information

Waseemakram
Waseemakram
1 year ago
Reply to  Jeffrey Ope

I want already Started investment but your Signal’s are best

Morten Kahl
Morten Kahl
1 year ago
Reply to  Waseemakram

I’m so hyped for crypto.
I pray for some good projects in the future and I’m in.

Bogdan Florea
Bogdan Florea
1 year ago

DCA is really good, especially when there is downtrend in place. I find it works if you hold an asset for long term, with good FA, so you can increase your bag. I’m talking more about DCA-ing alts.

kuldeep gajera
kuldeep gajera
1 year ago

I connected the dots in my mind using this complete information, earlier it was just pieces of information.
thanks for the this:)

Andre Mendes
Andre Mendes
1 year ago

Great article indeed. Thanks for sharing.

adnan hassan
adnan hassan
1 year ago
Reply to  Andre Mendes

Dollar cost average

GGkd
GGkd
1 year ago

This was by far the best read
Thanks

Khalid
Khalid
1 year ago

Great article, I have been using dollar cost averaging for a while in my Index fund.

Thomas
Thomas
1 year ago

Great article, I have been using dollar cost averaging for a while in my Index fund.

Rike Dieta Nielsen
Rike Dieta Nielsen
1 year ago
Reply to  Thomas

Great!

Ebad
Ebad
1 year ago

Binanice very secure and user friendly too

blaps
blaps
1 year ago

Great article indeed. Thanks for sharing.

arman7
arman7
1 year ago

Great article indeed. Thanks for sharing

blind
blind
1 year ago

well, this was good read 🙂

Alexander Chernov
Alexander Chernov
1 year ago

Binanice very secure and user friendly too

Riley
Riley
1 year ago

Thanks for the helpful information!

Shreyansh
Shreyansh
1 year ago

Quite an insight; appreciate it 😀

Yogesh
Yogesh
1 year ago

Helpful o_O

micheel
micheel
1 year ago

I did know bit of DCA but now I know all that is there(well almost)

hemu
hemu
1 year ago

thanks for the giveaway and good read

Shree Chandra Bhan
Shree Chandra Bhan
9 months ago

This has been really informative, thanks MyCryptoParadise for this amazing content!

Angel Reinier
Angel Reinier
9 months ago

Interesting information 👌

Carlos
Carlos
9 months ago

Good article, easy reading and consistent information.

Alexandr Dubrovin
Alexandr Dubrovin
9 months ago

Good information!

Gideon
Gideon
9 months ago

Great Information.
Such information keeps you bullish!

Arman
Arman
9 months ago

best team ever, thanks for the great article

Ede
Ede
9 months ago

Great educational post!

Oleg Maksimov
Oleg Maksimov
9 months ago

People invest in cryptocurrencies, in their technology and think about the future.

Render mejias
Render mejias
9 months ago

Me parece excelente

Роман
Роман
9 months ago

Отличная статья

Solariuz
Solariuz
9 months ago

This is very beautiful opportunity guys. The New era of trading is coming

Arjun Sindhav
Arjun Sindhav
9 months ago

Just to add now you use auto-invest from binance to automate DCA on top10 coins. ☺☺

Davide
Davide
9 months ago

Mcp god

donateeverything
9 months ago

Very educational and vet helpful. You cannot go wrong with DCA, hodl and swing. Good job!

Husnain
Husnain
9 months ago

Nice

shahram
shahram
9 months ago

Thanks alot for your article. It was very helpful.

SERHAT SUBASI
SERHAT SUBASI
9 months ago

you are doing this job perfectly

JNRCryptoCraze
JNRCryptoCraze
9 months ago

I want to have a deep additional knowledge on how the candle works in trading like what’s happening in our economy right now. Good to know we have this kind of website to visit! Thanks 🙂

Shellie Clark
Shellie Clark
9 months ago

Great info thanks

Elom Josué TONOUGBA
Elom Josué TONOUGBA
9 months ago

DCA is the best strategy

nasir
nasir
9 months ago

great article. It was very helpful.

Aziz
Aziz
9 months ago

It’s a great project 💯

Fatih
Fatih
9 months ago

Perfect

Christopher Rasoqosoqo
Christopher Rasoqosoqo
9 months ago

Awesome strategy

Eko Buntoro
Eko Buntoro
9 months ago

What happen today i check all crypto prices is red?

Dainis F
Dainis F
8 months ago

Interesting information

Franciscryptor
Franciscryptor
8 months ago

What an indepth info, a good analysis

remus ivanescu
remus ivanescu
8 months ago

Good idea! Cant wait to join!

Mas Ando
8 months ago

I just started invest my money on binance 😀

Olgu Kallis
8 months ago

Useful information. Recurring crypto buys feature saves time.

Gkuldeep
Gkuldeep
8 months ago

it is good thanks

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