Dollar-cost averaging (DCA) is a common strategy to accumulate Bitcoin, and is gaining momentum in the cryptocurrency world. Instead of taking risks and speculating on the Bitcoin price, you spend the same amount of dollars on Bitcoin every month (or every week, or every day), regardless of the price.
For instance, you buy $10 dollars worth of Bitcoin every day regardless of the price. You would probably miss out when the price hits the bottom, but it mitigates the impact of volatility on purchasing a huge amount of Bitcoin at once. It would also stop you from any impulse purchase.
Naïve DCA is the easiest risk-averse strategy to gradually accumulate Bitcoins. Nevertheless, sometimes you might sense that the price is too high, and you would want to avoid buying Bitcoin that day.
While it is usually not a good idea to let your emotions drive your investment decisions, we could rely on some technical indicators to signal your buy-ins. You can then tweak your strategy a little and buy say $10 worth of Bitcoin only when the asset is considered ‘oversold’.
Let’s take the relative strength index (RSI) as an example. It is typically used on a 14-day timeframe, and measured on a scale from 0 to 100. Traditionally, the asset is considered oversold when RSI is lower than 30. Therefore, if you might leverage this ‘buy signal’ and only employ dollar-cost averaging when RSI < 30.
