What is Dollar Cost Averaging?
Dollar Cost Averaging is an investment strategy in which investors invest their funds on a periodic basis. For example, Investor A is having $1000 and wants to purchase a bitcoin of $1000. So, Instead of purchasing a bitcoin of $1000, he will buy a bitcoin of $100 every week. The main idea behind this strategy is to divide funds into smaller chunks to invest periodically. This is one of the safest investment strategy in market.
CoinCodeCap has developed a tool that can help you to do an analysis of top 30 cryptocurrencies using the DCA strategy and get a final portfolio based on past data.
CoinCodeCap’s DCA for top 30 cryptocurrencies
This tool gives an idea about total investment, total value, profit/loss percentage involved in DCA strategy analysis. It also shows a graph of value and investment over time.
This tool will ask for the below inputs:
1. Cryptocurrency: Cryptocurrency, on which you want to apply DCA strategy. It supports the top 30 cryptocurrencies
2. Invested Amount: Amount that is invested during each purchase. For example, $100 if you bought a bitcoin of $100 every week.
3. Repeat Purchase Interval: This is a duration or a period between every purchase. For example, it can be weekly if you bought a bitcoin of $100 every week. This tool supports a period of daily, weekly, every two weeks, and monthly.
4. Investment Started From Last: This is a moment when you made your first purchase of cryptocurrency to apply the DCA strategy. For example, before 3 months, before 6 months, before 1 year, etc.
5. Accumulate For: This is the duration till which you want to continue purchasing. For example, 3 months, 6 months, 1 year, etc.
An example that will help you to familiarize yourself with this tool:
Consider today’s date is 1 April 2021.
Alice wants to do DCA strategy analysis for Ethereum cryptocurrency. He decided to buy an ethereum of $10 every month and started investing in an ethereum before 1 year and continued investing for 6 months.
Hence, Tool will show a portfolio from the Start date(1 April 2020) to the End date(30 September 2020).
Here, purchases are repeating every month. Hence, 6 purchases will be there.
1. Ethereum of $10 on 1 April 2020
2. Ethereum of $10 on 1 May 2020
3. Ethereum of $10 on 1 June 2020
4. Ethereum of $10 on 1 July 2020
5. Ethereum of $10 on 1 August 2020
6. Ethereum of $10 on 1 September 2020
So this tool will show a total investment of $60. The total value depends upon the price of the ethereum cryptocurrency. The tool will show the total value and profit loss percentage by analyzing past data. Value and investment over time graph show all the purchase, value, and price data between the start date and end date.