Investing five dollars every day might sound like a small amount, but for one Bitcoiner, it’s starting to add up. A year ago, this man decided to buy $5 (about €4) worth of Bitcoin daily. Now, he has accumulated 0.0224 BTC, which is currently worth €1,670.
What is Dollar-Cost Averaging (DCA)? #
This method is known in the financial world as ‘dollar-cost averaging,’ or DCA. The idea is simple: you regularly invest a fixed amount in an asset, regardless of its price. Whether the price is high or low, you keep buying. This prevents you from panic buying or selling at the wrong times. On average, it also gives you a good entry price.
DCA is based on the principle that ’time in the market’ is more important than ’timing the market.’ After all, nobody knows exactly when a cryptocurrency will hit its bottom or its peak. By investing in a staggered manner, you reduce the risk of buying at a peak.
Someone who invests a small amount daily builds a position almost unnoticed. For example, if you invest €5 daily for a year, you invest a total of €1,825. If the Bitcoin price develops favorably, that amount can increase significantly in value.
Of course, the reverse is also true: if the price falls, your investment becomes worth less. But because you buy at different times and at different prices, you spread the risk.
Starting Early Pays Off #
If you had applied this method five years ago, you might have saved enough for a mid-range car today. If you had started ten years ago, your investment might have even grown to the value of a used Ferrari. That’s easy to say in hindsight. However, it mainly shows what patience and consistency can yield.
DCA is not a guarantee of profit, but it is a strategy that brings calm to unpredictable markets. Whether you’re just starting to invest or have been active for a while: investing regularly and in a structured way is likely a smart move for long-term investors.
Curious what such a strategy could yield for you? With an online DCA calculator, you can calculate exactly what return you would have achieved with different starting times.
Bitcoin and Regret: A Familiar Duo #
We all know the stories. Like the teenager who bought $1,000 worth of Bitcoin at age 12 and became a millionaire. Or the man who wants to excavate an entire landfill because a hard drive with $800 million in lost Bitcoin is buried there.