Crypto is a very volatile domain with prices going up and down constantly. Such circumstances make day-trading and active investing quite risky yet offer a good opportunity for the crypto enthusiast who believes that blockchain solutions will become more valuable over time. For those who are interested in slowly growing a bigger portfolio, DCA bots offer a way to reduce the average price of investments while increasing the size of your wallet!

A DCA bot strategy

Dollar-cost averaging is not a newly discovered idea that turned the whole financial world upside down. The strategy was first invented and suggested by Benjamin Graham in 1949. His book “The Intelligent Investor” goes into detail on the topic of reducing the cost of investment over time.

The main principle is to create a strong portfolio with different assets without forgoing the main rules of diversification while focusing on reducing the average prices of assets. Using a fixed amount of money, an investor buys more shares (tokens) when they drop in price and less when the price goes up. Over several years, this strategy significantly reduces the average price.

It is a safer method of buying financial assets with growth potential. While trying to catch the asset during its lowest moment can be much more profitable, the risks are also immense as predicting the price movement is not as easy as it seems. Distributing costs across multiple purchases usually reduces the risk and allows for better financial yields from the perspective of years.

Where can you use DCA?

WunderTrading allows its users to connect different accounts on multiple exchanges simultaneously. Since prices on different exchange platforms may vary, it is a smarter solution to track all possible price variations across multiple marketplaces. DCA bots can buy assets from all exchanges. If you are running a DCA bot on KuCoin, you can focus on mainstream coins.

Some investors believe that NFTs have inherent value and may appreciate over time. A DCA bot for Binance can be a good idea since this platform is known for its huge focus on NFTs, play-to-earn games, and other crypto-adjacent projects.

Dollar-cost averaging can be applied to any asset purchasable partially. You don’t have to buy 1BTC every time you plan to expand your portfolio. Instead, you need to buy a portion and build up a bigger capital each time a price goes down or you have disposable income.

Benefits of a DCA bot crypto strategy

This particular method works best when you have disposable income that you want to invest. If you can afford to put aside a small sum of money but each week, over a year, you will reach a sizeable sum in your savings. DCA allows you to buy periodically without compromising the integrity of your investment plans. This is how the DCA bot works!

Crypto is a very promising financial instrument that may explode in popularity and value just as it did a couple of years ago. However, you have to be ready without negatively affecting your financial stability. Cost averaging is the best strategy for such scenarios. The true efficiency of the approach is still debated by experts and sophisticated financiers but it is the best option for small-time, conservative investors who consider their options in worrying times.

Diversification of investments

WunderTrading allows you to approach DCA with diversification in mind. You can purchase small fractions of Bitcoin or Ethereum on different platforms over time accumulating a bigger portfolio as the market experiences one of the longest downfalls. While this method can be ineffective for larger institutions, private investors may be even happier with constantly depreciating assets with a potential for incredible growth within the next decade.