For the vast majority of crypto investors, dollar-cost averaging (DCA) appears to be a must.
That’s according to a recent survey by US crypto exchange Kraken, which found that 83% of crypto investors have used dollar-cost averaging in the past to acquire their coins, with 59% of respondents stating it was their primary investment strategy.
“Dollar-cost averaging has survived as a strategy for the 75 years since the idea was first popularized, and I’d argue that’s for good reason,” Mark Greenberg, global head of asset growth and management at Kraken, told CoinDesk.
“As participants in the survey noted, dollar-cost averaging can help remove emotion from decisions and focus on long-term outlooks,” Greenberg said. “That’s especially critical in rapidly evolving technologies and markets like cryptocurrencies.”
Often called DCA for short, dollar-cost averaging is an investment strategy that entails acquiring exposure to an asset over a period of time across multiple purchases, instead of buying everything at once.
Hedging against volatility
The survey, conducted with 1,109 crypto investors and published on October 7, found that crypto investors privileged dollar-cost averaging for a variety of reasons.
Forty-six percent of respondents said the strategy helped them hedge against market volatility, while 24% of them said it encouraged consistent investment habits and 12% said it removed emotions from their decision-making process.
Perspective on the matter changes depending on one’s income: investors making less than $50,000 a year said the most significant benefit of dollar-cost averaging was the encouragement of consistent investment habits, but those making over $50,000 had more interest in reducing the impacts of market volatility.
“This difference might indicate that lower-income investors need more support with investment decisions, including maintaining regular contributions and sticking to a trading decision without emotional influence,” the report said.
“Lower-income investors most often choose riskier strategies like trying to time the market,” the report added, noting that respondents making less than $75,000 tend to prefer that strategy instead of dollar-cost averaging, whereas the vast majority of respondents making more than $150,000 privileged the more cautious route.
Higher income individuals also usually double-down on dollar-cost averaging when the market drops, whereas lower-income investors can just as likely stop trading for a while, or cut losses and sell.
Almost 74% of crypto investors keep a closer eye on markets than traditional investors usually do, the survey found. Surprisingly, that tends to be especially true of older investors — 66% of those between the ages of 45 and 60 reported checking crypto significantly more frequently than traditional markets, whereas only 33% of investors in their twenties said the same.