Guide
What is dollar-cost averaging?
Dollar-cost averaging (DCA) means investing a fixed amount on a fixed schedule — say $50 every week — regardless of the price on that day. When the asset is expensive your fixed payment buys fewer units; when it’s cheap it buys more. Over time your average purchase price tends to sit somewhere in the middle of the range you invested through.
It’s the same idea as a workplace pension contribution or a monthly savings transfer, applied to a volatile asset like Bitcoin, Ethereum or gold.
How it works — a worked example
Suppose you invest $100 a month for four months while the price moves around:
| Month | Price | $100 buys |
|---|---|---|
| 1 | $100 | 1.00 units |
| 2 | $50 | 2.00 units |
| 3 | $40 | 2.50 units |
| 4 | $80 | 1.25 units |
You put in $400 and hold 6.75 units. Your average cost is $59.26 per unit — below the simple average price of $67.50, because the fixed payments automatically bought more when it was cheap. At the month 4 price of $80 your stake is worth $540.
Why investors use it
- No market timing. You never have to decide whether today is a good day to buy.
- It smooths out volatility. A single unlucky purchase date matters far less.
- It's a habit. A fixed schedule is easy to automate and easy to stick to.
- It manages regret. Putting a lump sum in the day before a crash is a hard thing to sit through; averaging in spreads that risk.
DCA vs a lump sum
If you already have the money, investing it all at once has historically beaten averaging in most back-tested periods — simply because markets rise more often than they fall, so time in the market usually wins. DCA tends to come out ahead when the market falls or chops sideways after you start.
So DCA isn’t primarily a way to earn more — it’s a way to take less risk and remove the timing decision, which matters most for volatile assets and for money you’re adding from income over time anyway. The calculator shows both side by side, plus a “perfect timing” line (buying the exact low) as an upper bound.
Reading your backtest
- Invested
- Total contributions you paid in, including fees.
- Value
- What those holdings are worth on the end date (live price if the range runs to today).
- ROI
- Simple profit over total invested.
- Annualised (XIRR)
- A time-weighted return that accounts for when each contribution went in — the fairest way to compare strategies of different shapes.
- Avg cost / unit
- Net invested divided by units held — your effective entry price.
- Max drawdown
- The worst peak-to-trough drop in portfolio value along the way — a feel for how bumpy the ride was.
Where to buy crypto
Most people buy on an exchange. Fiat exchanges let you deposit money from a bank account and buy directly — convenient, more regulated, and where you should start. Crypto-only exchanges deal purely in digital assets (you fund them by transferring crypto in); they often list more assets but carry more risk.
Well-known fiat on-ramps:
The Binance link is a referral. Do your own research and only invest what you can afford to lose.