What is DCA?

DCA (Dollar Cost Averaging or price averaging strategy) is a method of dividing an investment amount into parts on a fixed, regular basis over a long period of time. Averaging the price is not strictly bottom/top fishing because it is calculated as the best price that can be purchased.

It is important to clearly distinguish that the average price here is the average in the price range with a large fluctuation range, not the average price in the market at the sideways stage.

2. DCA average price calculation formula

Average price = (1st purchase price × number of 1st purchase coins + 2nd purchase price × 2nd purchase quantity + … + n purchase price × n nth purchase quantity)/total number of purchased coins for n times.

For example: For 6 consecutive months, each month you spend $10,000 to buy ETH on the first day of the month. Eth price fluctuates over months as follows:

January: $1,000

February: $800

March: $1,300

April: $600

May: $1,000

June: $1,500

After 6 months, you can buy 63.5 ETH at DCA price of:

Average price = (1,000 × 10 + 800 × 12.5 + 1,300 × 7.7 + 600 × 16.7 + 1,000 × 10 + 1,500 × 6.7)/63.5 = $946.14.

So, if in the first month you use all $60,000 to buy ETH, you will only buy 60 tokens for $1,000. By using the DCA strategy, you bought more ETH at a lower price