Riding the waves: Why dollar cost averaging makes sense in digital asset investing
- What is dollar cost averaging?
- Why DCA works, especially in digital assets
- A simple example: one-time entry vs dollar cost averaging
- Institutionalizing a simple idea
- How we support dollar cost averaging
Timing the market is a seductive but elusive goal. Even the most seasoned investors with access to real-time data and sophisticated models struggle to consistently buy at lows and sell at highs. In the realm of digital assets, where volatility is high and narratives shift rapidly, this challenge is even more pronounced.
Enter dollar cost averaging (DCA), a time-tested investment strategy that swaps precision timing for discipline and consistency.
What is dollar cost averaging?
Dollar cost averaging is a straightforward strategy: instead of investing a large sum all at once, you spread your investment over regular intervals, investing the same amount each time regardless of market conditions. This reduces the risk of entering the market at a peak and helps smooth out the effects of volatility over time.
In practical terms, if you plan to invest €100,000 in digital assets, you could choose to invest €10,000 monthly over ten months. Sometimes you buy when prices are up, sometimes when they are down, but over time you accumulate assets at an average cost, rather than being exposed to a single entry point.
Why DCA works, especially in digital assets
Digital assets are notoriously volatile. Double-digit price swings in a single week aren't uncommon, and market sentiment can turn on a dime. While this volatility presents opportunity, it also carries the psychological challenge of staying committed when prices fall.
Dollar cost averaging sidesteps emotional investing. By automating purchases, DCA instills discipline and removes the temptation to time the market. It turns volatility from an enemy into an ally, enabling investors to accumulate more units when prices are low.
Moreover, DCA aligns with the macro thesis of digital assets. For investors who believe in the long-term adoption of blockchain, tokenization, and decentralized finance, the day-to-day price is less relevant than the trajectory over years. In that context, DCA becomes not just a risk management tactic, but a strategic method to build long-term exposure.
A simple example: one-time entry vs dollar cost averaging
Suppose an investor has €100,000 to allocate. They have two options:
- Lump sum investment: Invest the full amount on day one when the asset price is €1,000. They receive 100 units.
- DCA strategy: Invest €10,000 each month over 10 months. Assume the asset price fluctuates monthly as follows: €1,000, €900, €800, €700, €800, €900, €1,000, €1,100, €1,000, €900.
With DCA, their purchases accumulate as:
- Month 1: 10.00 units (€1,000)
- Month 2: 11.11 units (€900)
- Month 3: 12.50 units (€800)
- Month 4: 14.29 units (€700)
- Month 5: 12.50 units (€800)
- Month 6: 11.11 units (€900)
- Month 7: 10.00 units (€1,000)
- Month 8: 9.09 units (€1,100)
- Month 9: 10.00 units (€1,000)
- Month 10: 11.11 units (€900)
Total: 111.71 units compared to 100 units from a lump sum. Despite investing the same total amount, DCA resulted in over 11% more exposure due to buying more during the dips.
On the other hand, if the price keeps climbing up, investing one big lump-sum would have been better. But as mentioned before, timing the market is incredibly tough. Ease of mind is something an investor will get in return. Investors can also choose to wait until interesting opportunities arise. The digital assets market fluctuates and those dips can provide an interesting opportunity to dollar cost average or to increase a position if you expect the market to continue to go up.
Institutionalizing a simple idea
Historically, DCA has been a strategy favored by retail investors. But in today's maturing digital asset space, institutional and high-net-worth investors are increasingly using DCA to allocate capital in a measured, structured way. It's a reflection of a broader trend: crypto is no longer the domain of speculative bets, but a professional asset class demanding risk-managed entry.
At Hodl, we see this shift reflected in client behavior. Rather than taking large, one-time positions, more investors are choosing staggered entries, mitigating timing risk and aligning their investments with longer-term macro views.
How we support dollar cost averaging
With our digital asset funds, we offer clients the ability to dollar cost average after their initial commitment. While the minimum first entry remains €100,000, a threshold that ensures alignment with our long-term investment strategy, clients can choose to add to their position from as little as €5,000 per month thereafter.
This structure gives investors the best of both worlds: immediate access to a professionally managed digital asset portfolio, and the flexibility to build exposure over time in line with market conditions and personal strategy.
In an asset class as dynamic and narrative-driven as digital assets, DCA is more than a strategy. It's a mindset, one that prioritizes patience over prediction, and conviction over speculation.
