Automated Dollar-Cost Averaging into Bitcoin is here. Meet Deltabadger.
I’ve built a tool for friends and family, and you may need it too.
I cannot count the number of times someone asked me if it is the right moment to buy Bitcoin. “Should I buy now?” I leave a discussion about all ifs and whys for another occasion. The demand is real, and as somebody who benefited a lot from being around in the “Bitcoin bubble,” I never feel honest replying with the safe but lazy “Don’t.”
For the majority of people, the correct answer is always the same: dollar-cost averaging. Buy a small amount for a fixed dollar value on a regular schedule, so you buy a bit more when the price is lower and less when the price is higher. Over time you get a fair average price. It sounds right and easy, but in practice, only a few people can follow this advice. We love to make impulsive decisions. Following an organized routine demands much more effort and, let’s be honest, it’s kind of annoying.
Deltabadger is a friendly dollar-cost averaging bot that works with cryptocurrency exchanges. It automates the process in a set-and-forget manner. At the moment, it supports Kraken and Bitbay (with Polish users in mind). It’s easy to set up, sends notifications when something goes wrong. It also offers a simple chart and CSV export fo those who enjoy looking at how their investment performs over time, because who doesn’t?
It’s not the end of the good news: the bot is free up to $500/year. An honest sidenote: if you feel like $19/year for the unlimited version is too much, don’t invest more then $500 anyway. You’re welcome.
At this point, I must confess, I was looking for such a tool every year since I’ve got into Bitcoin. I was practicing DCA in various forms myself for most of that time. Still, I could do even better having Deltabadger with me along the way. Especially when friends and family started approaching me with questions about the topic. I am aware that the majority of people have neither the time nor energy necessary to follow a strict investing routine. (Let’s not call it a lack of discipline because I have no doubts my audience is very disciplined, right?) However, now they don’t have to. Fortunately, DCA doesn’t get any easier than with the help of automation.
Let’s quote what Deltabadger homepage tells about how DCA works:
You buy an asset for a fixed dollar amount on a regular schedule regardless of its current price. You get more of the asset when the price is lower, and less of it when the price is higher. As a result, you achieve a lower average price.
Example: You decide to buy Bitcoin for $100 every month:
In January, the price is $7000, you buy 0.0143BTC.
In February, the price is $5000, you buy 0.02BTC.
In March, the price is $8000, you buy 0.0125BTC.
Your average price is $6410 which is a bit lower than an average price in that period ($6666) since by fixing the amount spent, you adjust howYou get more bitcoins than by spending the whole $300 in January at once.
For people new to the idea of dollar-cost averaging, it’s essential to understand what this approach is not. DCA is not a strategy to maximize profit. When the price of the asset is continuously falling, you will be losing money anyway.
However, that’s not the biggest problem. People are losing money even when their investment is going in the desired direction. The biggest issue is emotions. We buy when we feel excited (often at the worst possible moment), and sell when we are scared or dissatisfied(usually not at the right time as well). DCA has such a great track of success because it helps to manage both emotions and the risk of bad market timing at the same time.
Still not sure? This online simulator helps to understand how DCA works in practice and offers some more explanation.
How to use Deltabadger?
You need to have an exchange account with funds in it. A couple of things:
- Every cryptocurrency exchange offers 2FA (second-factor authentication), and it’s absolutely unacceptable not to use it. Also, don’t use SMS as your second-factor — it’s not safe enough. Use Google Authenticator, Authy, or a physical token like Yubikey. Set it up before transferring your funds to the exchange. It’s critical.
- Don’t keep your funds at the exchange for too long. At some point, you have to transfer your coins from the exchange to a physical hardware wallet. Trezor or Ledger are both popular options. However, using an exchange has many benefits. First of all: you get a much better price in comparison to sellers sending coins directly to your wallet. Second of all, you can automate your purchases. That said, I selected Kraken as an exchange with a long presence and a track of never being hacked. Just withdraw your funds from time to time. There is a small withdrawal fee that probably should be considered while planning a reasonable schedule. Oh, and the withdrawal bot is coming.
- Deltabadger operates with your account using the exchange API. It walks you through the setup process, so don’t worry if you don’t understand what “API” is. Is it safe? Yes, the permissions you give to the app are limited, e.g., it cannot move your funds, etc.
When you have a verified exchange account with funds ready to use, log in to Deltabadger, and set the bot in a few minutes.
The website is live and fully functional. However, I am already working on a few more features:
- A referral program. I’ve been previously asked about it. The truth is, it was in the original scope but I decided to not postpone the launch any longer and add as soon as possible after it.
- I plan to add Ethereum, Monero, and Litecoin. I am not a big believer in dollar-cost averaging into altcoins, but I know there is a demand for that. A small “curated” list of coins is what I feel comfortable with at the moment. However, I consider removing them from the free plan since it’s not something I would encourage people to do myself.
- Optional limit orders. Currently, all orders are performed as market orders. A limit order usually offers a smaller transaction fee and possibly a lower price on average in general. On the flip side, it does not guarantee that every order will get filled. I am pretty sure it does make a lot of sense to offer this as an option, but it requires some additional R&D.
- I already mentioned the withdrawal bot.
I treat Deltabadger as a platform and DCA bot as its first product. I have many ideas. Stay in touch. Any feedback, bug reports, feature ideas, and suggestions will be appreciated.
Nerd corner: Smart intervals
As a user, you may notice that Deltabadger does DCA in an unusual way, which would be a challenge to replicate manually. It always performs the smallest order allowed by the exchange but modifies the time between transactions to get your desired ratio. I called it “smart intervals” for the lack of a better term, but it’s an easy concept:
Example: Let’s say you want to spend $1000 a month. The smallest allowed transaction size is $10. Deltabadger will buy Bitcoin for $10 every 7 hours and 12 minutes, spending on average $1000 a month.
There is a good reason for that approach since Kraken defines the transaction size in BTC. Because of that, a fixed dollar amount would be at risk of falling below this limit while the price keeps rising. Smart intervals solve this issue. If you feel confused, don’t worry — the bot takes care of it, and that’s all you need to know.
The idea, however, has its own story. A while ago, I was thinking about dollar-cost averaging into precious metals. The problem is similar: you cannot buy a fraction of a coin, so when price changes, it’s impossible to spend a fixed dollar amount every month or so. However, you can achieve statistically the same result modifying the time interval. In the scary language of math, you change denominator instead of the numerator.
Example: Let’s say you want to buy silver for $1 a day. The 1oz silver coin costs $22. You buy a single coin and schedule the next purchase in 22 days. The price of the second coin is $19, you buy it and set the next time in 19 days, etc. You buy more often when the price is lower and less often when the price is higher. On average, you spend $1/day.
I hope it does make sense. I haven’t seen this approach to DCA being discussed anywhere, but I am sure someone had that idea before. If you heard about it, please, let me know.