59% of Crypto Traders Use Dollar-Cost Averaging – What’s That and Why Is It Important?

• 59% of crypto traders use dollar-cost averaging (DCA) as their main investment strategy, while 83.5% have used it at least once.
• Most crypto investors think DCA's biggest benefit is lowering the impact of volatility.
• DCA is great at controlling trading emotions, especially for lower-income traders who stand to lose more from bad investments.

Crypto investing is a tough nut to crack.

Volatility is a big issue, and its cascading effects often lead to other problems, like pressure selling and fear of missing out.

But it seems traders are adapting - 59% use a DCA strategy to stay ahead of the curve and mitigate volatility.

A Kraken survey explains why the strategy works and why investors use it. Let's see what the exchange found.

Kraken Survey - A Quick Summary

Here's the gist of what the survey found:

• 83.5% of all crypto traders have used the DCA strategy.
• 59% are using DCA as their main investment tool.
• 50% of 18-29 year-olds prefer timing the market instead of DCA.
• More lower-income investors prefer timing the market than those earning over $100K.
• 63% of higher-income investors (above $100K) are very confident in DCA.
• 75% of crypto investors check crypto markets more often than traditional markets.

The survey also asked investors what they thought the biggest benefit of DCA was. And the results were pretty interesting.

Almost half of the 1,109 respondents use DCA because it reduces the impact of market volatility, which makes sense.

Investing regularly (once a month, for instance), regardless of the asset's price, tends to keep your average buying price stable (over time). It also reduces the risk of timing the market, which is notoriously difficult in the crypto space.

However, DCA isn't an all-powerful strategy. If the asset keeps declining, you're still losing money. Just at a slower rate than when investing a lump sum.Canceling Trading Emotion - DCA's Biggest Perk?

Kraken found that lower-income investors used DCA to remove emotions from trading decisions.' It makes sense, asthese traders typically have more to lose from poor investment decisions.

However, only8.13% of all DCA investors stick to the strategywhen things go sour and they experience losses.

And 61% of crypto investors who use DCA often double down when experiencing losses.

This tells us one thing - DCA is great at keeping emotions in check. It gives you an illusory sense of control over the market. Whether it pays off or not is uncertain.

But acting purely based on emotions is clearly the worst alternative.

Verdict - Is DCA a Good Crypto Strategy?

Dollar-cost averaging seems great for conservative traders who prefer safety over faster growth. While it produces slower profits,DCA is safer and less likely to lead to emotional decisions.

With crypto being so volatile, it's clear why most investors favor DCA. Even very high-income traders ($200K+) are overwhelmingly using DCA (77.7%)instead of timing the market (17.48%).

Timing the market does have its benefits (more potential profits), but it's more demanding on traders, which leaves DCA as the safest choice for most.

References

• Survey: 59% of crypto investors use dollar-cost averaging as their primary investment strategy (Kraken)

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