What is Rupee Cost Averaging (RCA)? What does it mean for BTC and ETH?

By February 24, 2021March 29th, 20224 minute read
What is Rupee Cost Averaging (RCA)_WazirX

It’s February 2021, and Bitcoin’s India rate is more than 38 lakhs. More people are turning to crypto assets as an investment than ever. In a matter as exciting and crowded as this, how can you optimize your gains?

Whether it’s crypto assets or other markets, investors always want to buy low and sell high. To achieve this, they have to implement several trading strategies that maximize profits while minimizing the risk. Rupee Cost Averaging or RCA is one such investment strategy to optimize your restricting traders from buying equity at a high price and increasing their chances of lowering their net buying price.

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In Rupee Cost Averaging, traders invest a fixed amount of capital in an asset at regular intervals. This ensures that the trader buying a particular asset can enter at the best price they can simultaneously, not missing an entry in the asset. 

What does Rupee Cost Averaging mean for BTC, ETH, and other crypto assets?

Rupee Cost Averaging is not just applicable to crypto assets; it is a relatively common practice in the crypto ecosystem. crypto assets tend to be volatile in nature. This means we see constant breakouts and fakeouts. Therefore it is preferable not to buy a particular crypto asset with all your capital all at once. Instead, accumulate them and buy them over extended periods, ideally during dips.

How to do Rupee Cost Averaging in crypto

Rupee Cost Averaging in crypto
Via: Getmoneyrich
  • First, an investor needs to figure out the amount of capital they need to invest in a token. 
  • For example, the capital allocated to a coin (let’s say you’re buying ETH) is INR 12,000.
  • Divide the amount into equal parts according to the number of supports above the lower trend line in the larger time frame. For example, if there are three supports (S1, S2, S3), you can divide your capital into INR 4000 each. 
  • You can also divide the allocated capital without the technical analyses just by dividing them into equal parts according to the number of times you want to invest over a fixed period of time.
  • Buy on the first support or right away. 
  • Invest in a fixed period of time if the coin price is lesser than your previous entry point. If you figured out the support, invest in S2 and then S3.

How does Rupee Cost Averaging work in crypto?

How does Rupee Cost Averaging work in crypto_wazirX

As mentioned above, as of February 2021, Bitcoin’s India Rate is more than INR 38 lakhs investing it now requires Rupee Cost Averaging. The first support is near 36 lakhs; the second is near 34 lakhs. If you invest all your capital at once at the current price, your bitcoin buying price would be 38 lakhs. 

If you apply Rupee Cost Averaging in this case and all the buying targets get hit, your net buying can decrease to around 36 lakhs. On the other hand, if you don’t use RCA and the price drops,, your net buying price is still 38 lakhs even though it will probably rebound. So if you apply RCA in this case, you can earn two lakhs more per Bitcoin compared to going all-in on the current price. 

Advantages of Rupee Cost Averaging

  • If a coin’s price is at its support, and there is a chance that the price action can go either way, RCA is the best way to enter since you can buy the dips while not missing an entry. 
  • By investing on a fixed schedule, traders can avoid the complex process of figuring out the best time to invest. 
  • Rupee Cost Averaging is a perfect tool to counter the crypto world’s volatility and provides you with an opportunity to decrease the net buying price. 
  • Investors can have the capital to buy the dips in terms of potential market crashes.
  • Investors can stop investing in case of a critical bearish crossover; this way, they will only lose a chunk of the allocated capital. 
  • If you are an emotional investor, Rupee Cost Averaging can save you from selling your holdings; instead, you would be hoping for a dip so you can buy more. 

Disadvantages of Rupee Cost Averaging

  • Rupee Cost Averaging could be useful in maximizing profits, but it could be a double-edged sword. Imagine you split your capital, and only some of the initial targets got hit, and the coin price shot up, you won’t be able to use the allocated capital; hence this will affect your net profits. 
  • The task of allocating your assets and figuring out support could be complicated.

Rupee cost averaging is a powerful tool in a bearish market, and this method gave the phrase” buy the dips” meaning. So what are you thinking about? Head over to WazirX and buy crypto assets in INR with RCA.

How To Invest In Cryptocurrency?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is considered the procedure of verifying and adding transactions to the blockchain public ledger. Another option is via cryptocurrency exchanges. Exchanges generate money by collecting transaction fees, but there are alternative websites where you can interact directly with other users who want to trade cryptocurrencies.

How To Invest In Bitcoin?

Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.

What Are The Chances Of Bitcoin Crashing?

Two Yale University economists (Yukun Liu and Aleh Tsyvinski) produced research titled "Risks and Returns of Cryptocurrency" in 2018. They looked at the possibility of Bitcoin crashing to zero in a single day. The authors discovered that the chances of an undefined tragedy crashing Bitcoin to zero ranged from 0 percent to 1.3 percent and was around 0.4 percent at the time of publishing, using Bitcoin's history returns to determine its risk-neutral disaster probability. Others claim that because Bitcoin has no intrinsic value, it will inevitably crash to zero. On the other hand, Bitcoin advocates argue that the currency is backed by customer confidence and mathematics.

Is Cryptocurrency Legal In India?

In India, cryptocurrencies are legal; anyone can purchase, sell, and trade cryptocurrencies. They are currently unregulated; India does not have a regulatory framework in place to regulate its functioning. According to the Ministry of Corporate Affairs (MCA), companies must now declare their crypto trading/investments during the financial year, according to the Ministry of Corporate Affairs (MCA). Cryptocurrency transactions have been taxable in India when people receiving such gains are Indian tax residents or where the crypto is considered to be domiciled in India

What Is Meant By Bitcoin?

Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.

Is Bitcoin Cash A Good Investment?

Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.

How To Make Bitcoin?

Bitcoin mining is not just the process of putting new Bitcoins into circulation, but it is also an essential part of the blockchain ledger's upkeep and development. It is carried out with the assistance of highly advanced computers that answer challenging computational math problems. Miners are rewarded for their efforts as auditors. They are in charge of ensuring that Bitcoin transactions are legitimate. Satoshi Nakamoto, who is the founder of Bitcoin, innovated this standard for keeping Bitcoin users ethical. Miners help to prevent the "double-spending problem" by confirming transactions.

Can I Invest In Cryptocurrency?

Yes, with exchanges like WazirX, you may invest in cryptocurrency in India. To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process.

What Is Bitcoin And How Does It Work?

Bitcoin is decentralized digital money that may be bought, sold, and exchanged without an intermediary such as a bank. Bitcoin is based on a blockchain that is considered to be a distributed digital ledger. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain

How To Create Bitcoin Account?

Firstly, Go to the WazirX website and sign up. Then, a verification mail will be sent to you. The link sent via verification mail would be available only for a few seconds so make sure you click on the link sent to you as soon as possible, and it will verify your email address successfully. The next step is to set up security, so select the most suitable option for you. After you have set up the security, you will get a choice to either proceed further with or without completing the KYC procedure. After that, you will be directed to the Funds and Transfer page, where you could start depositing Bitcoins to your wallet. You can also deposit INR and then use it to buy Bitcoin for your WazirX Bitcoin wallet.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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