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5 tips to maximize your crypto dollar-cost averaging (DCA) strategy


Here’s how to make your crypto investments go further in a bear market.

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Sponsored by VirgoCX – the easy way for Canadians to buy & sell cryptocurrency, via the app or your browser. It’s made for both aspiring and expert crypto traders. Access features such as grid trading, auto recurring buys, funding by debit card, stop-limit orders and a large selection of digital assets.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

Most people first buy crypto when the bull market is raging.

They hear from influencers, friends or loved ones that they can make a killing in digital asset markets and they want in on the action.

Unfortunately, if you’re buying once the bull market is in full swing, you may be a bit late to the party. To paraphrase an old adage, fortunes are amassed in bear markets and collected in bull markets.

Right now, the prices of many crypto assets are quite low – at least compared to where they were a year ago.

This doesn’t necessarily mean it’s time to ape into the crypto market – or make one big crypto purchase with a large sum of money.

Instead, you may want to consider dollar-cost averaging (DCA) – an investing strategy that involves making recurring purchases on a fixed schedule.

An example of “DCAing” into crypto would be buying CAD$100 worth of Bitcoin (BTC) on the first of every month regardless of the price of BTC. Doing so provides you with several potential benefits, including:

  • Reducing risk
  • By averaging out your investments into smaller, regular amounts, you can mitigate the risk of investing all your money (or a large portion) when prices are highest.

  • Reducing emotion
  • DCAing can help you take the emotion out of investing by sticking to a set schedule rather than basing your decisions on market sentiment.

  • Long-term returns
  • A DCA strategy may allow you to purchase more units of an asset when prices are low and fewer when prices are high, allowing for a better return over a long enough time frame.

  • Automation
  • By using a platform that allows you to make recurring purchases, you can setup your DCA strategy and let it operate in the background with very little maintenance compared to other investment strategies.

The following are some tips to help you to maximize — and supplement — your DCA strategy.

1. Do your own research

Before enacting your DCA strategy, take some time to think about which crypto assets you really feel are worth investing in for the long haul. After all, DCA is a longer-term strategy.

The momentum of the bull market often makes us more prone to speculate without properly researching what we’re buying.

Right now, the bear market gives us an opportunity to collect our thoughts and to dive deeper in our research.

2. Decide on the frequency and amount for your recurring buys

When you DCA into crypto, you are simply making regular purchases of digital assets on a regular basis such as daily, weekly, bimonthly or monthly.

Some Canadian crypto exchanges such as VirgoCX have a recurring buys feature to help facilitate this.

VirgoCX screenshot of recurring buy orders

Doing so can help mitigate the stress of investing in a volatile market like crypto. The price you pay for your assets is averaged out over time and is less dictated by short-term fluctuations or emotions.

So, decide on how frequently you want to make crypto purchases and how much cash you want to spend on each of those purchases.

For example, you may choose to purchase CAD$25 worth of Ethereum (ETH) every week.

This approach can be very fruitful over time especially when you apply it in a prolonged bear market and then DCA out of the assets you’ve purchased in the bear market once a bull market returns. More on that in tip 5 though.

3. Supplement your DCAing with grid trading

DCAing doesn’t have to be the only strategy you implement. There may be moments when the price of your favourite assets drops and it makes sense to capitalise on this.

Grid trading is a way to automatically buy or sell cryptocurrency assets when their price reaches a certain level. VirgoCX also provides grid trading features for Canadians.

For example, if you want to buy more BTC when its price falls below CAD$20,000, you can set up a grid trading system to place a buy order with a certain amount of cash whenever BTC drops below this price. The system can then sell those assets for you when the price rises, potentially allowing you to buy low and sell high – provided the market moves in your favour.

This can be more efficient than manually placing buy and sell orders each time you make a trade as you don’t need to sign into your exchange account to do so.

VirgoCX screenshot of ETH/CAD open orders

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

4. Find your exit point

DCA isn’t just a way to make your crypto purchases. It’s also a strategy for selling your crypto assets.

Over time, bear markets come to an end and bull markets resume.

Once this happens, you can begin trading out of your crypto positions and back into fiat or stablecoins like USDC as a way to take profits.

It’s just as hard to sell the top of the market as it is to buy the bottom, so DCAing out of your crypto investments is a great way to lock in some gains. Grid trading is another tool you can use to automate this process and lock in profits at regular price intervals.

5. Find a platform that has features to support your strategy

Once you’ve decided on which assets you’d like to invest in, the amount and frequency of your recurring buys and whether or not you’d like to employ the grid trading method, it’s time to find a crypto exchange that supports your strategy.

For example, VirgoCX is one Canadian exchange that supports over 50 crypto assets. It allows you to automate your investing with its recurring buy feature feature and grid trading.

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Sponsored: Sign up to Canadian crypto exchange VirgoCX – and receive $20 CAD when you’ve successfully verified and funded your account with at least $100 CAD in a single deposit. T&Cs apply.

Bottom line

Crypto is an extremely volatile asset class. It can be extremely stressful to invest in if you don’t have a solid strategy in place.

DCAing is one way to gain exposure to crypto while mitigating some of the stress and helping remove emotion from your decision-making. By using a platform with automated features like recurring buys, you can further maximize your strategy and let the market do the hard work for you.

Remember: DCAing isn’t just a method for making crypto purchases. It’s also a strategy for taking profits.

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