Recurring purchase graph

Recurring purchases

Some exchanges offer to set up an order to buy bitcoins or any other crypto on a daily, weekly or monthly basis. This is what is called “recurring payment” or “savings plan”. If you are in doubt whether it is a good idea to buy crypto right now, then it could be very useful to use recurring purchases as it would spread your purchases out and you would then be less affected by price drops. By buying in smaller chunks then you are spreading your risk.

This is not investment advice. It is just an example of how you could manage your risk if you are investing in bitcoin or other cryptocurrencies

Managing your risk

One of the smartest ways to invest in bitcoin is to buy small chunks at the time. This you can do by setting up risk levels when you invest.

Example

Let’s say that the price right now is $10.000, if you believe that bitcoin over the next year or two it will go back to $20.000 then you could manage your risk like this.

You buy bitcoin every week for $100 if the price moves lower then you increase your weekly investment, if it moves higher then you decrease your weekly investment. This you should only do if you believe that bitcoin in the long run will go up.

Below you will find a metric for how you could invest in bitcoin with the risk management described above.

Risk level Investment size Bitcoin price
18 -$650 $21.000
17 -$400 $20.000
16 -$200 $19.000
15 -$100 $18.000
14 -$50 $17.000
13 0 $16.000
12 0 $15.000
11 0 $14.000
10 $25 $13.000
9 $50 $12.000
8 $75 $11.000
7 $100 $10.000
6 $125 $9.000
5 $150 $8.000
4 $225 $7.000
3 $300 $6.000
2 $400 $5.000
1 $525 $4.000

What you can see is that the lower the price of bitcoin gets the higher amount you invest. If the price goes up, the less you invest because you don’t get that much value for money. And if the price reverses then you rather want to buy lower than at the $12-16.000 levels.

At the risk level 11-13 you are not investing anything because it is getting too risky at these levels. When it begins to move above $16.000 then you start to take profit. Hence the negative investment size. You do this as your price target ($20.000) is getting closer and therefore a greater risk for price reversal.

Dollar cost averaging

Recurring purchasing also called dollar cost averaging. dcabtc.com is a really good site where you can see how much you would have spent and earned if you would have set up a recurring purchase.

Dollar cost averaging

In the image above you would have spent 10$ every week the last two years. However even though Bitcoin has gone down more or less the whole 2018 you are in profit of 33%, this is because you have bought all the way down to the bottom and continued to buy. In that way you will also be sure to have bought at the bottom and this will be beneficial as soon as the market turn and go up again. Of course there are no one that can tell if bitcoin will go up again. But if you believe that this is they case then it is a good way to build up a crypto portfolio.

Exchanges with recurring purchase option

Both Bitpanda and Coinbase offer recurring purchases via credit card.

Name Region Credit card fees Go there
Bitpanda Europe 1.5% Go to Bitpanda
Coinbase Australia, Europe, UK and US 3.99% Go to Coinbase