Unlocking the Potential: Dollar-Cost Averaging Ethereum

Sep 18, 2023

If Bitcoin is the king of crypto, then Ethereum is indisputably the queen. While Ethereum’s token ether (ETH) isn’t valued as highly as BTC (approx. USD 1.6k vs. USD 25.8k), it still stands tall as a pioneering trailblazer in the crypto world.

Using smart contracts, Ethereum unlocked a vista of potential for blockchain technology. It enabled people to trade crypto, build decentralized applications (dApps), and deploy decentralized finance (DeFi) tools without a middleman.

That’s why ETH remains so highly coveted and why it will always be in demand.

This is where you come in as an investor. If you want to invest in ETH for the long term (or even the short term), then dollar-cost averaging (DCA) is the way to go.

Read on to discover why and how you should adopt DCA to invest in ETH.

Why Invest in Ethereum?

Ethereum is so much more than just a cryptocurrency. It is a platform that enables smart contracts and decentralized applications (dApps) without a third party.

Ethereum boasts impressive utility value that guarantees its longevity. By combining innovation and adaptability, Ethereum stands as a frontrunner in the blockchain world and is, therefore, a solid choice to invest in for the future.

Here’s a list of use cases that Ethereum has enabled so far:

1. Smart Contracts and Decentralized Applications (dApps)

Ethereum is the head honcho of smart contracts in the crypto world, allowing you to encode rules into self-executing agreements.

Smart contracts opened the doors to dApps, which have begun to disrupt several industries, including finance, healthcare, and supply chain management.

2. DeFi (Decentralized Finance)

The finance industry has been shaken up by Ethereum’s smart contracts, giving rise to Decentralized Finance (DeFi) — financial services that don’t require third-party intermediaries like banks. DeFi seeks to equalize the financial playing field, allowing people of all nationalities and income levels to participate.

Ethereum serves as the foundation for DeFi, which has since evolved with the creation of other blockchains and platforms. Some examples include Polygon (MATIC), Sui (SUI), Solana (SOL), and Polkadot (DOT).

Learn the basics of DeFi and discover why DeFi yields are high.

3. Ethereum 2.0 and Scalability

In 2022, Ethereum transitioned fully from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism via a process called “The Merge.” This upgrade was essential for reducing Ethereum’s energy consumption issues by at least 99.95%.

Looking ahead, Ethereum will only continue to progress in terms of scalability and efficiency, solidifying its position as a stable crypto to invest in.

4. NFTs (Non-Fungible Tokens)

Even if you’re not involved in the space, chances are you have heard of NFTs (non-fungible tokens). NFTs have taken the art, gaming, and entertainment worlds by storm, and Ethereum was the first blockchain to enable the creation and trade of these unique digital assets.

NFTs further showcase Ethereum’s ability to adapt to new innovations that stretch beyond just crypto.

Is Dollar-Cost Averaging Good for Ethereum?

Of course! While Ethereum has incredible real-world utility and solid long-term prospects, its token ether (ETH) is still subject to the same volatility that other cryptocurrencies face.

Dollar-cost averaging (DCA) is the best way for you to work around Ethereum’s volatility, preventing you from making rash decisions each time you see a price swing.

To illustrate, assume you have $10,000 and want to buy ETH. You can:

  1. Buy $10,000 worth of ETH in one lump sum, or
  2. DCA $10,000 worth of ETH every month for six months.

Let’s say you started investing on 1 March 2023. Here’s how your investment would perform by August 2023, based on the historical closing prices of BTC from Yahoo Finance:

eth dca table

From the table above, using DCA will net you 5.904 ETH from investing $10,000 over 6 months.

In this example, the average cost for both strategies, DCA and lump sum:

  • DCA: $10,000 ÷ 5.905 ETH = $1,693.42 per ETH
  • Lump sum: $10,000 ÷ 5.864 ETH = $1,705.11 per ETH

Overall, it’s clear DCA can be more profitable than lump-sum investments - especially since it nets you more ETH when the price is lower and less when the price is higher.

What is the Best DCA Strategy for Ethereum?

There is no hard and fast rule on how you should plan your DCA strategy for Ethereum. The strategy you build will vary depending on risk appetite, time horizon, and objectives.

As a general guideline, follow these points when you build your strategy:

1. Start small and increase gradually.

This rule applies especially if you’re new to Ethereum and crypto in general. Start with small investment amounts until you’ve become more familiar with the crypto world.

2. Stay consistent.

DCA doesn’t deliver instant results, so it’s important that you stick to your plan closely.

There will be times when ETH performs well, but this shouldn’t be your cue to pump extra money into this coin - especially if the uptick in price comes abruptly and isn’t backed by a reasonable explanation.

In short, buy ETH at a regular cadence and trust the process.

3. Be flexible and adaptable.

DCA is all about building a fortune by being consistent, but your circumstances and goals aren’t static - they’ll inevitably change as you progress through life’s many hoops.

It’s wise for you to be open to change, adjusting your strategy when needed.

What Platform Does Dollar-Cost Averaging for Ethereum?

Ready to build your DCA strategy for ETH? The next step is to find a good platform to do so. Across the field, there’s a variety of choices that you can pick to simplify the DCA process for you.

Here are the main options you can look at:

1. Cryptocurrency Exchanges: Major exchanges like Coinbase, Binance, and Bake offer DCA as “Recurring Buys,” allowing you to set up your DCA plan easily. Check out the 8 best exchanges to DCA crypto to decide where to set up your strategy for ETH.

2. Crypto Wallets: This one’s a manual option, where you have to personally buy ETH at regular points by yourself. With no automation involved, you must be extra disciplined to stick to your plan.

Kickstart your ETH DCA journey with Bake

Ether (ETH) is a solid crypto to invest in, and you should match this with a clear DCA plan to help grow your wealth at a consistent, predictable pace.

You can start right now by setting up recurring buys with Bake. With the lowest fees in the market and guaranteed rewards, Bake is here to help you achieve your goals faster.

That’s not all - from now until 01 November 2023, you can win a Tesla and a share of US$200,000 in prizes in Bake’s Baking Hot Summer Giveaway.”

Win tickets for every ETH recurring buy you make and increase your chances of winning by inviting your friends to sign up for a Bake account. More than just tickets, you’ll also earn referral commissions for every successful sign-up.

DISCLAIMER: Please note that the information on this blog and in any articles posted on this blog is for general information only and should not be relied upon as financial advice. Cake Pte. Ltd., Bake, UAB, and its affiliates (the “Cake Group”) are not licensed financial advisers. You may wish to approach your own independent financial advisor before making any decision to buy, sell or hold any product and/or digital assets mentioned in this blog.

Any views, opinions, references, assertions of fact and/or other statements are not necessarily the views held by the Cake Group. The Cake Group disclaims any liability whatsoever that may arise out of or in connection with such statements. Always do your own research before investing in any financial assets and consult a qualified financial advisor if necessary.



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