Crypto Investors Mostly DCA Into Their Coins, Finds Kraken

Mark Greenberg, head of asset growth and management at Kraken, recently stated that dollar-cost averaging has endured for 75 years because it is effective, as expressed to CoinDesk. He believes this is due to its ability to eliminate emotion from investment decisions and focus on long-term perspectives. This aspect is particularly valuable in fast-paced technologies and markets such as cryptocurrencies, where change happens quickly.

Frequently abbreviated as DCA, dollar-cost averaging refers to a method of investing where one gradually buys a particular asset over a specified duration, rather than purchasing it all at once in a single transaction.

Hedging against volatility

A recently published study, involving 1,109 participants who invest in cryptocurrencies, revealed that many prefer the strategy of dollar-cost averaging for multiple reasons.

Approximately half of those surveyed (46%) reported that this strategy aided them in managing market unpredictability, around a quarter (24%) felt it promoted regular investing, and about one-tenth (12%) believed it eliminated emotional factors when making investment choices.

Perspective on the matter changes depending on one’s income: investors making less than $50,000 a year said the most significant benefit of dollar-cost averaging was the encouragement of consistent investment habits, but those making over $50,000 had more interest in reducing the impacts of market volatility.

The report suggests that lower-income investors might require additional assistance with investment choices, such as maintaining consistent investments and resisting emotional impacts on trading decisions. It also mentions that these investors typically opt for riskier methods like attempting to predict market trends, contrasting with dollar-cost averaging which is more commonly preferred by high-income earners making over $150,000 per year.

High earners often tend to intensify their investment strategy known as dollar-cost averaging during market downturns, whereas lower-income investors may choose to pause their trades temporarily, or even sell off their investments to minimize losses.

It was discovered in a survey that around 74% of crypto investors are more vigilant about market movements compared to typical traditional investors. Interestingly, this behavior is particularly prevalent among older investors, with 66% of those aged between 45 and 60 admitting they monitor the crypto market more frequently than traditional markets. In contrast, only 33% of investors in their twenties made similar claims.