Bitcoin Sees Bear Market: Why Dollar-Cost Averaging Could Help Investors

Bitcoin (CRYPTO: BTC) is currently experiencing a decline, falling 30% from its January peaks, which has left many investors anxious. Expectations were high that 2025 would see Bitcoin reaching $1 million. Amid this uncertain climate, there is a timeless investment strategy that may serve investors well in today’s market.

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Understanding Dollar-Cost Averaging (DCA)

Dollar-cost averaging (DCA) represents a strategic approach for cryptocurrency investors aiming to harness Bitcoin’s long-term price potential. Simply put, DCA involves committing to purchase a fixed dollar amount of an asset at regular intervals regardless of its price fluctuations. This means you buy fewer coins when prices are high and more when they fall.

For instance, you could choose to invest $50 in Bitcoin every month. Regardless of market movements, you will consistently purchase that amount every 30 days. Whether Bitcoin’s price is rising, dropping, or stable, your investment schedule stays the same.

The Benefits of DCA for Bitcoin Investors

In August 2024, Bitcoin Magazine analyzed a potential DCA strategy targeting newcomers to cryptocurrencies. They found that investing just $10 weekly over the last five years could have increased $2,620 to $7,913, resulting in an impressive return of 202%.

When looking at other asset classes during the same five-year timeframe, Bitcoin’s performance stands out starkly. Investing $10 weekly in gold would yield a return of only 34.5%. Similarly, investments in the Dow Jones would produce a return of 23.4%, and $10 weekly in Apple would lead to a 79.1% return.

Bitcoin’s volatility is essential to understanding its superior performance. It can achieve significantly higher peaks and, conversely, lower troughs than traditional assets. This volatility means that during Bitcoin’s steep decline in 2022—when it lost 65% of its value—investors could acquire units at bargain prices, setting the stage for gains when the market rebounded in 2023 and 2024.

A Practical Example of DCA with Bitcoin

If one were to DCA daily rather than weekly, the results become even more compelling. As noted by Michael Saylor, founder and executive chairman of MicroStrategy (now known as Strategy), adopting a daily DCA strategy of $30 over nine years from 2016 to early 2025 could have transformed $98,000 into $2.2 million. This surge occurred as Bitcoin’s price escalated from $800 to $108,000.

Image source: Getty Images.

Thanks to a modified DCA strategy, Saylor’s firm has emerged as the world’s largest corporate Bitcoin holder, boasting 528,185 Bitcoins on its balance sheet as of March 30. The company initiated its Bitcoin purchases in August 2020, navigating significant market fluctuations to hold approximately $40 billion in Bitcoin value today.

Points to Consider Before DCAing Into Bitcoin

Given these insights, you might be asking: What’s the downside? If this strategy is so promising, why aren’t more investors adopting it? The primary challenge lies in managing considerable volatility while maintaining disciplined investment habits.

Malevolent fluctuations are inevitable in Bitcoin investing. Investors often speak of having “diamond hands,” which refers to the necessity of staying the course during downturns. It means resisting the urge to sell when confronted with a sharp decline, despite external pressures from friends and family may sway them otherwise.

This approach is not simple; Bitcoin has historically faced significant declines, with at least five periods when its value dropped by more than 77%. Presently, Bitcoin’s decline of 30% raises uncertainty about whether another downturn is happening, especially if trade tariff concerns linger.

Thus, the best approach now might be to consistently purchase Bitcoin, both during declines and recoveries. By committing to regular investments—even at a modest rate of $10 per week—you may experience significant growth in your holdings over time.

Consider This Second Chance for Investment

Do you feel like you missed out on investing in top-performing stocks? You may want to pay attention now.

Occasionally, our analysts issue a “Double Down” Stock recommendation for companies poised for significant growth. If you fear you’re too late to invest, the current moment could be critical. The historical performance shows:

• Nvidia: A $1,000 investment when we doubled down in 2009 would now be worth $296,487!*
• Apple: If you invested $1,000 when we doubled down in 2008, you’d have $37,700!*
• Netflix: A $1,000 investment made during our 2004 double down would be worth $509,884!*

Currently, we are issuing “Double Down” alerts for three exceptional companies, which may present unique opportunities.

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*Stock Advisor returns as of April 5, 2025

Dominic Basulto owns positions in Bitcoin. The Motley Fool also has positions in and endorses Apple and Bitcoin. Their disclosure policy is available for review.

The opinions expressed in this article reflect those of the author and do not necessarily align with the views of Nasdaq, Inc.