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Crypto Terms:  Letter D

What is Dollar Cost Averaging (DCA)?

Meaning:
Dollar Cost Averaging (DCA) - an investment strategy where a person invests the same amount of money for set period of time.
easy
2 minutes

Let's find out Dollar Cost Averaging (DCA) meaning, definition in crypto, what is Dollar Cost Averaging (DCA), and all other detailed facts.

Dollar Cost Averaging (DCA) is when you invest the same amounts of money every set amount of time, at regular intervals. It is believed that the term was first used by Benjamin Graham, in a book he wrote called "The Intelligent Investor".

DCA is a well-known strategy among investors - not only crypto ones, mind you, but in general. They use it when they have a goal of avoiding risk exposure, as well as so that their investment would not be greatly affected by market volatility.

DCA can be both automatic, as well as manual (depending on the platform of choice). It can also vary in time periods, amounts of money per investment, and other criteria - it's completely custom, and up to the individual to decide on.

Here is a simple example of a DCA:

Let’s say that two people that have different investment methods and profiles - Tom and Jane, invested in Ethereum. Tom has an idea to buy $300 of ETH every month until he has 1 ETH.

DATE ETH Purchased Total ETH (sum) Total Cost
May 4 0.1309 0.1509 $300
June 4 0.1499 0.3008 $600
July 4 0.1702 0.451 $900
August 4 0.2823 0.7333 $1200
September 4 0.1998 0.9331 $1500
October 4 0.1112 1.0443 $1800

He was able to get 1 ETH for a total price of $1,800 using this strategy. His strategy was very different since Jane just purchased one whole ETH that cost $2,300.

DATE Total ETH Total Cost
May 4 1 $2,300

Jane got 1 ETH in May. In this case, she paid more than Tom. Her total investment cost was $2,300. This shows that investors might profit from using the DCA strategy. In this particular scenario, Jane paid more than Tom, because she purchased one ETH immediately, rather than investing particular amounts for an extended amount of time.

The reason behind creating the term itself is because of the demand of reducing the average cost of the total amount of assets bought.

In essence, the investor would be able to purchase a lesser piece of an asset for a higher price. Simultaneously, when the asset's price falls, more units are sold. As a result, the investor would enter a position progressively, rather than all at once.

cryptocurrency assets<\/strong><\/a> in their holding to be considered <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-whale/">whales. However, they also <strong>hold more cryptocurrency than small-range players<\/strong>.<\/p>\n<p>Cryptocurrency traders and investors are classified using a scale based on aquatic terms. The smallest investors are known as <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-fish/">fish (or minnows), and they are in possession of a small portfolio that may only consist of one cryptocurrency. Those with <strong>exceptionally large holdings<\/strong> are referred to as whales.<\/p>\n<p>Unlike dolphins or fish, whale transactions are observed by the crypto community on platforms such as Whale Alert. Their large-scale transactions on the <a href=https://www.bitdegree.org/"https:////www.bitdegree.org//crypto//buy-bitcoin-btc/">Bitcoin blockchain<\/strong><\/a> <strong>receive more attention<\/strong> and demonstrate low <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-transaction-fee/">transaction fees<\/strong><\/a>, which is one of the biggest advantages of this particular cryptocurrency.<\/p>\n<p>Crypto whales are able to move thousands or even millions of dollars worth of cryptocurrency in a transaction, paying only a few dollars as <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-gas-price/">gas fees<\/strong><\/a>. It is generally presumed that <strong>the whale status is what the dolphins are aiming to reach<\/strong>.<\/p>","definition":"an entity with a moderate size of cryptocurrency holdings.","status":"published","meta_title":"What is Dolphin? Definition & Meaning | Crypto Wiki","meta_description":"Dolphin meaning: Dolphin - an entity with a moderate size of cryptocurrency holdings.","meta_keywords":null}" :prev-section="{"id":286,"wikipedia_url":"https:\/\/en.wikipedia.org\/wiki\/Documentation","level":"easy","author_id":1,"created_at":"2023-06-19T06:58:59.000000Z","updated_at":"2024-01-06T15:22:03.000000Z","slug":"what-is-documentation","title":"What is Documentation?","section":"D","keyword":"Documentation","content":"<p><strong>Documentation&nbsp;is one of the four most important parts of token economies which refers to the economics of products and services that have been tokenized.<\/strong><\/p>\n<p>Blockchain allows specific economies to operate without intermediaries while documenting and providing ownership, digitizing physical assets, executing specific rules, and enabling potential trading.<\/p>\n<p>In addition, blockchain is very suitable for developing <strong>forge-proof records.<\/strong> Besides, documentation is the starting point of <a href=https://www.bitdegree.org/"//crypto//buy-bitcoin-btc/">Bitcoin transactions and can safeguard several other financial transactions. When records and information are required to be forge-proof and revision-proof, documentation works great as well.<\/p>\n<p>By providing the integrity of the information and establishing the timestamp <strong>on-chain,<\/strong> blockchain documentation eliminates these doubts. Documentation also assists in proving the authorship of the document through the use of <strong>a cryptographic signature<\/strong>.<\/p>\n<p>When something has been recorded on the blockchain, it is impossible to generate a unique <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-hash/">hash of this information. This enables users to prove that they possess the initial, unaltered documents by just verifying it one more time.<\/p>\n<p>In addition, it is almost impossible to prove the unchangeable<strong> time of origin of a signed agreement, claim, or document outside of a blockchain setting<\/strong>. Photographs and autographs may both be simply manipulated.<\/p>\n<p>The procedure also includes a timestamp, which allows the user to pinpoint the precise minute when a block was <strong>validated<\/strong> by a blockchain network. As the whole network is synchronized among <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-node/">nodes all over the world, the timestamp guarantees that data input can be confirmed and documented.<\/p>","definition":"is a section that keeps all the data of an asset on the blockchain.","status":"published","meta_title":"What is Documentation? Definition & Meaning | Crypto Wiki","meta_description":"Documentation meaning: Documentation - is a section that keeps all the data of an asset on the blockchain.","meta_keywords":null}" :model="{"id":973,"wikipedia_url":"https:\/\/en.wikipedia.org\/wiki\/Dollar_cost_averaging","level":"easy","author_id":1,"created_at":"2023-06-19T06:59:01.000000Z","updated_at":"2024-01-06T15:24:30.000000Z","slug":"what-is-dollar-cost-averaging-dca","title":"What is Dollar Cost Averaging (DCA)?","section":"D","keyword":"Dollar Cost Averaging (DCA)","content":"<p>Dollar Cost Averaging (DCA) is when you invest the same amounts of money every set amount of time, at <strong>regular intervals<\/strong>. It is believed that the term was first used by Benjamin Graham, in a book he wrote called \"<em>The Intelligent Investor<\/em>\".<\/p>\n<p>DCA is a well-known strategy among investors - not only crypto ones, mind you, but in general. They use it when they have a goal of avoiding risk exposure, as well as so that their investment would not be greatly affected by market volatility.<\/p>\n<p>DCA can be both automatic, as well as manual (<em>depending on the platform of choice<\/em>). It can also vary in time periods, amounts of money per investment, and other criteria - it's completely custom, and up to the individual to decide on.<\/p>\n<p>Here is a simple example of a DCA:<\/p>\n<p>Let&rsquo;s say that two people that have different investment methods and profiles - Tom and Jane, invested in <a href=https://www.bitdegree.org/"//crypto//buy-ethereum-eth/">Ethereum. Tom has an idea to buy <strong>$300<\/strong> of ETH every month until he has 1 ETH.<\/p>\n<table style=\"border-collapse: collapse; width: 100%; height: 154px;\" border=\"1\">\n<tbody>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">DATE<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">ETH Purchased<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">Total ETH (sum)<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">Total Cost<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">May 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1309<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1509<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$300<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">June 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1499<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.3008<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$600<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">July 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1702<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.451<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$900<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">August 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.2823<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.7333<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$1200<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">September 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1998<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.9331<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$1500<\/td>\n<\/tr>\n<tr style=\"height: 22px;\">\n<td style=\"width: 22.9636%; height: 22px;\">October 4<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">0.1112<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">1.0443<\/td>\n<td style=\"width: 22.9636%; height: 22px;\">$1800<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>He was able to get 1 ETH for a total price of <strong>$1,800<\/strong> using this strategy. His strategy was very different since Jane just purchased one whole ETH that cost <strong>$2,300<\/strong>.<\/p>\n<table style=\"border-collapse: collapse; width: 100%;\" border=\"1\">\n<tbody>\n<tr>\n<td style=\"width: 31.284%;\">DATE<\/td>\n<td style=\"width: 31.284%;\">Total ETH<\/td>\n<td style=\"width: 31.2862%;\">Total Cost<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 31.284%;\">May 4<\/td>\n<td style=\"width: 31.284%;\">1<\/td>\n<td style=\"width: 31.2862%;\">$2,300<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Jane got 1 ETH in May. In this case, she paid more than Tom. Her total investment cost was $2,300. This shows that investors might <strong>profit<\/strong> from using the DCA strategy. In this particular scenario, Jane paid more than Tom, because she purchased one ETH immediately, rather than investing particular amounts for an extended amount of time.<\/p>\n<p>The reason behind creating the term itself is because of the demand of reducing the average cost of the total amount of assets bought.<\/p>\n<p>In essence, the investor would be able to purchase a lesser piece of an asset for a higher price. Simultaneously, when the asset's price falls, more units are sold. As a result, the investor would enter a position progressively, <strong>rather than all at once<\/strong>.<\/p>","definition":"an investment strategy where a person invests the same amount of money for set period of time.","status":"published","meta_title":"What is Dollar Cost Averaging (DCA)? Definition & Meaning | Crypto Wiki","meta_description":"Dollar Cost Averaging (DCA) meaning: Dollar Cost Averaging (DCA) - an investment strategy where a person invests the same amount of money for set period of time.","meta_keywords":null,"author":{"id":1,"user_id":1,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2023-05-11T07:18:20.000000Z","title":"Editor-In-Chief","slug":"aaron-s-editor-in-chief","description":"<p>Having completed a Master&rsquo;s degree on Economics, Politics &amp; Culture for the East Asia region, Aaron has written scientific papers with a comparative analysis of the differences between US&rsquo; Western and Japan&rsquo;s Collective forms of capitalism, 1945-2020.<\/p>\n<p>With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He&rsquo;s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.<\/p>\n<p>Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain &amp; Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.<\/p>\n<p>Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.<\/p>","user":{"id":1,"first_name":"Aaron","last_name":"S.","email":"aaron@bitdegree.org","email_sanitized":"aaron@bitdegree.org","email_verified_at":"2023-12-01T09:40:20.000000Z","must_verify_email":false,"is_registered_with_wallet":false,"status":"active","country":"LT","last_connected_ip":"88.119.132.125","image_id":2641,"referral_token":"05TMu2NysXOCn525","referred_by":null,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2024-01-09T15:22:21.000000Z","full_name":"Aaron S."}}}" :chapter-list="[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-blockchain.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/blockchain-101.jpg","rating":100,"sections":[{"chapter_id":1,"order":1,"slug":"what-is-blockchain","title":"What is the Blockchain?","status":"published","modified_content":null},{"chapter_id":1,"order":2,"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":3,"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","status":"published","modified_content":null},{"chapter_id":1,"order":4,"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","status":"published","modified_content":null},{"chapter_id":1,"order":5,"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":6,"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out For?","status":"published","modified_content":null}]},{"id":2,"title":"Cryptocurrencies","slug":"cryptocurrencies","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-cryptocurrencies.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/cryptocurrencies-101.jpg","rating":100,"sections":[{"chapter_id":2,"order":1,"slug":"what-is-a-cryptocurrency","title":"What is a Cryptocurrency?","status":"published","modified_content":null},{"chapter_id":2,"order":2,"slug":"how-does-cryptocurrency-work","title":"How Does Cryptocurrency Work?","status":"published","modified_content":null},{"chapter_id":2,"order":3,"slug":"is-cryptocurrency-a-good-investment","title":"Is Cryptocurrency a Good Investment? The Pros & Cons","status":"published","modified_content":null},{"chapter_id":2,"order":4,"slug":"coin-vs-token","title":"Coin VS Token: How Do They Differ?","status":"published","modified_content":null},{"chapter_id":2,"order":5,"slug":"what-are-stablecoins","title":"What are Stablecoins, Altcoins & Wrapped Coins?","status":"published","modified_content":null},{"chapter_id":2,"order":6,"slug":"what-is-a-bitcoin","title":"Bitcoin: the Pioneer of the Crypto World","status":"published","modified_content":null},{"chapter_id":2,"order":7,"slug":"what-is-ethereum","title":"The Ultimate Blockchain for dApp Creation: Ethereum","status":"published","modified_content":null},{"chapter_id":2,"order":8,"slug":"what-is-cardano-in-crypto","title":"What is Cardano and What is It Used For?","status":"published","modified_content":null},{"chapter_id":2,"order":9,"slug":"what-is-shiba-inu-coin","title":"Shiba Inu: the Dogecoin 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(NFTs)?","status":"published","modified_content":null},{"chapter_id":6,"order":1,"slug":"what-is-defi","title":"What is Decentralized Finance (DeFi)?","status":"published","modified_content":null},{"chapter_id":6,"order":2,"slug":"what-is-defi-2-0","title":"DeFi 2.0: The New Version of Decentralized Finance","status":"published","modified_content":null},{"chapter_id":6,"order":3,"slug":"what-are-dapps-in-crypto","title":"What Are dApps and How Do They Work?","status":"published","modified_content":null},{"chapter_id":6,"order":4,"slug":"defi-dapps","title":"Picking the Right dApps: Dos and Don'ts","status":"published","modified_content":null},{"chapter_id":6,"order":5,"slug":"what-is-web-3-0","title":"Web 3.0: The Future of the Internet","status":"published","modified_content":null},{"chapter_id":6,"order":6,"slug":"what-are-smart-contracts","title":"What is the Core Purpose of Smart Contracts?","status":"published","modified_content":null},{"chapter_id":6,"order":7,"slug":"what-is-a-dao-in-crypto","title":"The Notion of a Decentralized Autonomous Ogranization (DAO)","status":"published","modified_content":null},{"chapter_id":6,"order":8,"slug":"what-is-staking-in-crypto","title":"What is the Goal of Staking Crypto Assets?","status":"published","modified_content":null},{"chapter_id":6,"order":9,"slug":"what-is-liquidity-pool-in-crypto","title":"What is a Liquidity Pool and How Does It Work?","status":"published","modified_content":null},{"chapter_id":6,"order":10,"slug":"what-is-automated-market-maker","title":"Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry","status":"published","modified_content":null},{"chapter_id":6,"order":11,"slug":"what-is-yield-farming-in-crypto","title":"The Main Yield Farming 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