Dollar-cost averaging (DCA) is a popular investment strategy in which investors invest their money in regular intervals instead of making their entire investment in one go. The goal of a DCA strategy is to reduce the impact of large short-term price fluctuations on your investment.
An important aspect of DCA is that you should stick to making your purchases at the interval that you decided upon, no matter what the current price is – doing otherwise would defeat the purpose of this investing strategy.
The benefits of dollar-cost averaging (DCA)
For example, let’s say that you have decided to make a $2,000 investment into Bitcoin. You could choose to buy $2,000 worth of Bitcoin today, but the cryptocurrency markets are very hard to predict. You never know whether you’re buying at a relatively good price or if the market is getting ready for a huge crash that will make you wish you waited a bit longer.
Here, the famous quote “Time in the market beats timing the market” comes to mind. The main idea is that investing with a long-term outlook will typically produce better results than trying to find the perfect entry and exit points for your investment.
From a short-term perspective, markets are very complex and prices are affected by countless factors. Trying to time the bottoms and tops might work for some time, but the odds are likely to catch up to you sooner or later, and you could get caught up in the downward spiral of making increasingly risky trades to “win back” your losses. A sound investment should perform well over a long period of time, even though there might be ups and downs along the way.
Adopting a DCA strategy is a good way to deal with this dilemma. You could decide to split your $2,000 investment into 20 purchases of $100 across 20 weeks, 5 purchases of $400 over 5 months, or any combination that makes sense to you. This investment strategy has less potential upside than timing the market, but it also has a much smaller downside.
You can DCA into crypto on Binance thanks to the new Recurring Buy feature
Some cryptocurrency exchanges have recognized that there’s a lot of demand from customers for investing through a DCA strategy. Binance, the most popular exchange on the market today, has recently implemented a feature called “Recurring Buy” to meet this very demand.
By setting up a Recurring Buy on Binance, you can automatically invest an amount into a cryptocurrency of your choosing at regularly scheduled intervals – every week, every two weeks, or every month. You can even set which day and time you’d like to make your Recurring Buys at.
On Binance, the feature is available for purchases with Visa and Mastercard credit and debit cards. Make sure to check with your card issuer to ask about any fees they might be charging on such purchases.
The process of setting up a Recurring Buy on Binance is quite straightforward. Before we go through the step-by-step guide, however, let’s quickly outline some of the main features of Recurring Buys on Binance.
- Available for purchases through Visa/Mastercard cards (you can save up to 5 cards)
- Automatically invest a set amount into crypto at regular intervals
- Supports weekly, bi-weekly and monthly purchases
- You can change or cancel your Recurring Buy plan at any time
How to set up a Recurring Buy on Binance?
Before you can start DCAing into crypto through Recurring Buys on Binance, you’ll have to create an account with the exchange. Creating an account will take you just a few minutes.
Please note that if you want to purchase cryptocurrency through Recurring Buys on Binance, you’ll have to verify your identity first. Practically all cryptocurrency exchanges that accept payments with fiat currency (USD, EUR, etc.) have this requirement.
Once you’ve created your Binance account and verified your identity, you can set up your Recurring Buy.
In our example, we’ll be setting up a recurring buy where we will be purchasing $100 worth of Bitcoin on a monthly basis. We’ll choose to make our purchases at the 1st of every month at 18:00 at UTC+2.
Please note that when you’re setting up a recurring buy, the first purchase will be made immediately. The subsequent transactions will be made according to the schedule you selected.
1. Set up your recurring buy
First, find the “Credit/Debit Card” section under the “Buy Crypto” menu at the top of the Binance interface.
Next, choose how much you want to spend with each recurring purchase, and which cryptocurrency you want to purchase. In our case, we set the amount to $100, and the cryptocurrency to Bitcoin. Make sure to toggle on the “Recurring Buy” option.
Here’s where we can customize our recurring buy. Set the frequency, the day of the month to make the purchase, and the time. In our example, we will set the “Recurring frequency” to “Monthly”, set “Repeat on” to the 1st, and set the time to 18:00 (UTC+2). Our Recurring Buy now matches the DCA plan we decided on previously – we’ll be investing $100 into Bitcoin on a monthly basis.
2. Add your Visa/Mastercard card
After you press “Continue”, you’ll have to add the card that you’ll be using to make the payments. Select the “Add New Card” option.
Now, you can enter the information for your card.
After you’re done filling in the information about your card, you’ll have to select the card you’ve just added.
3. Confirm your purchase
Before confirming your purchase, make sure to double-check all of the parameters of your purchase. You’ll see how much you’ll be spending, and how much BTC you will receive with your first buy.
You will also see when the next payment of your recurring buy will take place. Please keep in mind that the amount of BTC that you’ll be able to get with your next recurring buy will depend on future market conditions.
If everything looks good to go, click “Confirm”. Binance will notify you that your first purchase is being processed.
Once the purchase is processed, you will be able to see that you’ve received your Bitcoin and that your recurring payment is enabled.
4. Track or edit your Recurring Buy
Now that your recurring buy is set up, you can track it under the “Buy Crypto History” section. Here, you will be able to see all of your Recurring Buy plans that are currently active. By clicking on “View Plan”, you can see the transaction history, or customize/cancel the plan.
If you want to change anything about your Recurring Buy plan or cancel it, click on “Manage”.
The bottom line
Dollar-cost averaging can be a great strategy if you’re investing in cryptocurrency or any other asset with a long-term outlook. Not only can DCA mitigate the effects of volatility, it can also help you take emotions out of investing. Instead of emotionally making your buying and selling decisions and worrying about what’s happening in the market, you can simply stick to your DCA plan and take the stress out of the equation. With its Recurring Buy feature, Binance has provided a great tool to implement a DCA strategy for cryptocurrency investing that provides enough customization options for most crypto investors. Hopefully, this article helped you get started!