The dollar-cost averaging method of investing in bitcoin, the world’s most popular digital currency, has become incredibly popular. Learn about Bitcoin DCA and how it works.

This is a partner article sourced from Laura Shin Unchained, published by CoinDesk.

What is Bitcoin dollar-cost averaging?

Dollar-cost averaging Bitcoin, or Bitcoin DCA is an investment strategy that involves buying a certain amount of BTC on a regular basis, regardless of the price.

This allows you to stick to a schedule of investing a certain amount each week or month. You can reduce the impact of the short-term volatility in the market by setting a specific amount to invest. This will buy more BTC at low prices and less BTC at high prices, resulting in a cost per BTC that is averaged out. Cost-averaging is the result.

This results in a low-stress, disciplined investment strategy. You can reduce emotional reactions by avoiding making decisions based on the short-term movements of the price (i.e. trying to time the markets).

What is Bitcoin DCA?

Let’s now look at the dollar cost average of bitcoin. This is how it works.

  • Create a budget. Decide how much money you are comfortable investing on a regular basis. Some bitcoin saving apps let you start with just $10. However, it’s up to you what amount you invest each week or every month.
  • Choose the frequency: You can choose every week, twice a week or once a monthly. It’s entirely up to you.
  • Choose a platform that is reliable: A place to purchase BTC is necessary. Find a bitcoin app or exchange that offers recurring payments. Swan (US), Relai(Europe), and Bitnob(Africa) are examples of popular Bitcoin DCA applications.
  • Start stacking Sats: After registering for a Bitcoin DCA Platform, you can set up regular bank transfer, and then the app will purchase bitcoins for you at predetermined intervals, based on your preset settings.
  • Stay calm, stack and HODL. While your Bitcoin savings app buys bitcoins for you regularly, ensure that the bitcoin wallet is a safe, non-custodial one (a wallet in which only you have the private keys). This will allow you to “HODL” the bitcoins you invest for the long term.

Why is “Stacking Sats with Bitcoin DCA” so Popular?

The Bitcoin community uses the term stacking sats to describe buying small amounts bitcoin. Sats are short for satoshis – the smallest bitcoin denomination. One satoshi equals one hundred millionth of a bitcoin.

  • Anyone could do it. Dollar cost averaging is simple and easy to understand. To get started, you don’t require extensive financial or cryptocurrency knowledge.
  • There is no need to try to time the markets: It’s almost impossible to buy (or to sell) at the perfect time. This is true for both professionals and newcomers. Instead of obsessing about bitcoin price charts, dollar-cost-averaging auto-savings in bitcoin can alleviate the stress and headache of trying to figure out when to buy.
  • Keep calm, no matter what: You can avoid panicky buying and selling by automatically saving bitcoins. You can forget about the bitcoin price if you regularly invest in it for the long-term as part of your investment plan.
  • Dream big, start small: Bitcoin dollar cost averaging lets you build up your bitcoin investment with time, even when you have only a small amount to invest. If you stack sats over several years, the small bitcoin purchases that you make each week or month can add up to a significant bitcoin saving.

Bitcoin DCA allows you to invest in BTC easily and without worrying about short-term fluctuations. It allows even those with a small amount of capital to invest in the world’s most popular digital asset.

Remember, BTC investment has risks and you should not invest your entire savings. Bitcoin DCA is a good way to invest bitcoin if you have a long-term horizon.