Holding and DCA to invest in financial products in 2024

Investing in the cryptocurrency market can seem like a daunting task, especially for those just starting out. However, classic strategies like holding and DCA have helped investors of all experience levels achieve their financial goals with BTC, ETH, and altcoins.

The holding strategy is nothing more than buying and holding digital tokens for an extended period, focusing on long-term value growth. This approach is based on the belief that despite short-term fluctuations, assets tend to grow over the years.

On the other hand, DCA aims to reduce volatility risk by investing fixed amounts regularly. By spreading investments over time, investors can reduce the impact of price fluctuations and build a solid position in a disciplined manner.

With distinct but complementary approaches, both strategies offer effective paths to good results. Today, in this review, we will explore a little more about both investment methodologies, with some tips that can help you buy and manage cryptocurrencies.

What does holding and DCA mean ?

Holding, or Hodl, which emerged in the world of cryptocurrencies due to a typo of the word “ holding ” on the BitcoinTalk forum, designates a type of investment for the long term. In the context of investing in BTC and other cryptos, holding refers to the practice of buying and holding digital assets , regardless of short-term price fluctuations, with the hope that their value will increase significantly in the future.

A practical example of holding would be an investor who buys Bitcoin and decides to hold it for several years, ignoring daily fluctuations and short-term negative news, with the expectation that the value of the digital asset will increase significantly over time.

DCA, which is nothing more than the acronym for Dollar-Cost Averaging , is a strategy in which the investor divides the total amount to be applied into small equal installments and invests them regularly , regardless of the price of the asset being addressed in the market.

For example, instead of investing $1,200 in BTC all at once, an investor could choose to buy $100 of the cryptocurrency every month for a year. This method aims to reduce the risks associated with market volatility, which can be difficult and risky.

The main difference between the two methodologies is the timing and frequency of asset purchases. While holding involves the initial purchase of assets and their holding for long periods, DCA focuses on distributing the investment at regular intervals to smooth out price fluctuations. Check out the table:

How to combine holding with DCA for long-term investments?

Research has already shown that Brazilians are increasingly interested in investing in cryptocurrencies, and holding and DCA strategies can be used as allies in long-term investments. After all, combining the two methodologies is a way to maximize the chances of profit in relation to market risk.

By using DCA, investors buy more units when prices are low and fewer when they are high, which can result in a lower average purchase cost. By holding, they benefit from the long-term growth of cryptocurrencies.

This combination is ideal for those who believe in the future of cryptocurrencies but want to minimize the impact of short-term fluctuations. It is a disciplined and systematic approach that does not require trying to predict the market. Let’s say you have decided to invest in Bitcoin with the following strategy:

• Total investment amount: R$1,200
• Investment time horizon: 1 year (12 months)
• Regular Investment (DCA): $100 per month

Based on these assumptions, consider investing in the following way to combine holding and DCA in your crypto stocks:

1. Set up an investment account: Open an account with a trusted cryptocurrency exchange.
2. Set the monthly amount: since your contribution is R$1,200, consider investing R$100 in Bitcoin every month.
3. Monthly investments: on the first day of each month, buy R$100 in Bitcoin, regardless of the price. Repeat this operation for 12 months.
4. Holding: Hold all Bitcoin purchases without selling, regardless of price fluctuations throughout the year.

By buying monthly (DCA), you reduce the impact of price fluctuations over time and maintain a reasonable average cost in BTC. In addition, you can take advantage of the cryptocurrency’s appreciation potential over the years with the holding technique.

Quality brokerages for holding and DCA in Brazil

Choosing the right broker is essential to implement holding and DCA strategies efficiently and safely. In Brazil, several platforms stand out for offering ease of use and specialized support for these strategies. Below, we detail the characteristics of three popular options among new investors:

Binance: practical, safe and popular in the Brazilian market

Binance is a digital trading platform that stands out for its robustness and reliability, offering a wide range of cryptocurrencies and features that make it ideal for holding and DCA. With a cost-effective approach, Binance has low service fees and supports instant payments.

In addition, it invests heavily in digital security, with features such as two-factor authentication (2FA) and phishing protection. Its ecosystem includes its own token (BNB), used for discounts on fees and participation in new projects through Binance Launchpad.

With an interface that is accessible on both desktop and mobile devices, Binance currently has over 200 million users worldwide. Its popularity is directly linked to its simplicity: the platform makes life easier for investors who are looking for practicality when setting up their investment strategies.

Access Binance Brazil

Gate.io: proven usability and low operating costs

Gate.io is known for its security and convenience. With low fees, which average around 0.2% per transaction, it is a popular choice for those who want to minimize their operational costs. However, it is important to note that each service within the platform may have specific fees, and users are advised to consult the website or support for detailed information.

In addition to competitive fees, Gate.io stands out for its 24/7 customer support. With features available on both the web and mobile apps for iOS and Android, the platform offers convenience and accessibility to traders, allowing them to trade a wide range of cryptocurrencies anywhere, anytime.

Based in the United States, Gate.io is increasingly popular in Brazil, especially after using NFTs to help an animal shelter in the country. Today, the exchange stands out for offering a wide range of cryptocurrencies for trading, with more than 150 digital assets in its catalog, which include BTC, ETH, DOGE, Solana and others.

Open an account at Gate.io

eToro: the ideal exchange for DCA strategies

Offering a wide range of options that include stocks, digital asset tokens, ETFs, and several other trading instruments, eToro stands out as an attractive and advantageous solution for investors around the world, including in the Brazilian market.

In addition to its robust asset offering, eToro stands out for its innovative social interaction tools. These tools allow investors to engage and share insights in real-time, creating a vibrant community of traders.

With a clear focus on transparency, security and technological innovation, eToro invests millions in creating NFTs and is well positioned to continue attracting investors looking for a reliable platform for online trading.

Create your new eToro account

How do we choose brokers for holding and DCA?

Choosing the right broker for holding and DCA strategies is crucial to ensure safety, convenience, and potential returns. After a detailed analysis, eToro, Binance, and Gate.io stood out as the best options for these strategies. Here are the criteria we considered in our evaluation:

Security

Security is one of the most important factors when choosing a broker. Binance, eToro, and Gate.io all offer high levels of digital protection, including two-factor authentication (2FA), cold storage of funds, and insurance against cyberattacks.

To verify the efficiency of brokers, we conduct security tests on demo accounts and review reports from independent sources. We also check each broker’s history of security incidents and how they were resolved, ensuring that the overall experience for investors is positive.

Mobile Compatibility

Investing in cryptocurrencies should be practical and accessible from anywhere. That’s why we analyzed the mobile compatibility of each of the three brokers and their respective mobile apps. We checked whether they are easy to use and whether their functionalities are, in fact, common for holding companies and DCAs.

We test each application on different mobile devices, both iOS and Android, evaluating the interface, usability and speed of execution of operations. We also consider user reviews in the app stores (App Store and Google Play).

Fees and Costs

Fees can significantly impact your returns, especially on DCA strategies. Comparing eToro, Binance, and Gate.io, we found that they offer competitive rates with standard fees for deposits, withdrawals, and trading.

We perform a detailed analysis of each broker’s fee tables and simulate purchase and sale operations to calculate the real costs involved. In practice, this facilitates predictability and financial planning.

Customer Support

Having efficient customer support is essential to resolve any issues or queries quickly, and all three brokers have solid reputations for customer service, offering multiple contact channels such as live chat, email and telephone support, as well as a comprehensive knowledge base.

We tested the support of each platform in practice, measuring the response time and the quality of the solutions offered. In addition, we also considered the availability of a service in Portuguese, personalized for Brazilian investors.

Adaptation to the Brazilian Market

Finally, we consider how well each broker is adapted to the Brazilian market. We can see that they have support options in Portuguese, accept deposits in BRL (R$), and offer popular payment methods in Brazil, such as local bank transfers and Pix.

To validate the assessment, we performed deposit and withdrawal tests in reais, using local payment methods. In addition, we navigated through the Portuguese interfaces of each platform and evaluated the quality of the translation, ensuring that the brokers offer a fully adapted experience.

Are there risks in holding and DCA?

Investing in cryptocurrencies through holding and DCA strategies can be an effective way to build and manage your money over time. However, it is essential to be aware of the risks involved in order to make informed decisions, as both methods have advantages and disadvantages.

Riscos do Holding

As you already know, holding involves buying cryptocurrencies and holding them for a long period of time, regardless of market fluctuations. On a day-to-day basis, one of the main risks of this strategy is the volatility of the cryptocurrency market.

Prices can fluctuate dramatically in short periods of time, leading investors to significant losses if they are not prepared to deal with these dynamic chart fluctuations:

DCA Risks

Since DCA is a strategy of investing fixed amounts of money at regular intervals, the risks are different. While this approach can reduce the impact of volatility, it presents other issues that deserve investors’ attention.

One of the main challenges is that if the market is in a prolonged downtrend, traders may end up buying assets that are continually falling, resulting in an undervalued portfolio.

Another risk associated with DCA is that it can lead to a false sense of security, causing investors to not pay enough attention to the market. It is important to stay informed about market developments and adjust your strategy as needed.

What are the best financial assets for holding and DCA?

Choosing the right financial assets for holding and DCA strategies is crucial to maximizing returns and minimizing risks. When identifying cryptocurrencies that are compatible with these strategies, it is important to consider factors such as volatility, historical performance, and market utility. Here are some criteria and examples of cryptocurrencies that are suitable for these strategies.

How to identify a cryptocurrency for holding and DCA?

Before investing in a particular cryptocurrency, you need to understand its concept, as well as its practical features and long-term project. This is a fundamental analysis to reduce risks and increase the accuracy rate in controlling a portfolio. Below, we list 4 tips for deciphering a cryptocurrency and its advantages in holding and/or DCA:

1. Positive performance history: Cryptocurrencies with a solid track record of long-term appreciation are good candidates for holdings . Analyze price charts over the years and see how they have performed in different market cycles.
2. Volatility: Less volatility means less risk of large losses in short periods. In other words, stable cryptocurrencies are more suitable for those seeking security.
3. Market acceptance and use: Active tokens that are widely accepted and used are more likely to remain relevant and valued. Check whether the cryptocurrency is used in important transactions, partnerships, and projects.
4. Technology and innovation: Assets with robust technologies and continuous innovations tend to have a brighter future. Consider the development team and community that supports the cryptocurrency.

Examples of Cryptocurrencies for Holding and DCA

Now, let’s get to what really matters: practical examples of cryptos that can be used in both holdings and DCAs. Check out some assets that are always in the portfolios of large investors and can be safe alternatives for their strategies:

• Bitcoin (BTC) : This is the first and most well-known cryptocurrency, with a solid track record of long-term appreciation. Its global acceptance and high liquidity make it a popular choice for holding and DCA strategies.
• Ethereum (ETH) : Known for its smart contract platform, ETH supports a wide range of decentralized applications. With an active community and continuous technological improvements, Ethereum is an attractive option for long-term investment.
• Stablecoins : Stablecoins are cryptocurrencies designed to maintain a stable value relative to a fiat currency, such as the US dollar. Examples of stablecoins include USD Coin (USDC), Binance USD (BUSD), DAI, and HUSD. In practice, they are ideal for DCA strategies as they offer less volatility and greater predictability.

In addition to the more traditional and stable cryptocurrencies, altcoins and memecoins have been gaining increasing popularity in the market. These coins, which include examples such as Cardano (ADA), Solana (SOL), Dogecoin (DOGE), PEPE, Shiba Inu (SHIB) and others.

In practice, they offer opportunities with high potential returns, but they also carry significant risks due to their greater volatility and speculation. Therefore, it is essential to study each of them beforehand, understanding their functionalities and proposals.

How much can I earn from long-term holding investments?

The potential for gains in holdings depends significantly on how the cryptocurrency evolves over time . While it is unlikely that we will see a boom similar to that of Bitcoin, which went from pennies to thousands of dollars in a few years, there is still substantial opportunity for appreciation.

Experts recommend paying attention to growth rates, as these are what determine an investor’s real profits. The cryptocurrency market is extremely volatile, but there is a tendency for coins that feature consolidated projects and continuous innovation to appreciate.

Cryptocurrencies with a robust technological base and strong market acceptance tend to appreciate over time, even amid volatility. When evaluating BTC and other stable assets in the crypto market, it is worth considering the table below:

Tips for earning more from holding investments

As we’ve already mentioned, appreciation rates can vary widely between different cryptocurrencies. Therefore, diversifying your portfolio is an effective strategy to maximize potential profits in the long run .

By investing in a variety of cryptocurrencies, including both established coins and promising emerging projects, you can reduce risk and increase the chances of earning high returns. Consider the following tips:

• Study cryptocurrencies: analyze the performance history and fundamentals of each cryptocurrency. Also, stay up to date on the latest news and technological developments of the projects.
• Choose established projects: focus on cryptocurrencies with robust technologies and market acceptance. To do this, check the development team and the support community.
• Track growth rates: Regularly monitor the appreciation of your cryptocurrencies and adjust your strategy as needed to take advantage of growth trends.
• Be patient: Holding is a long-term strategy; avoid selling during bear markets. Therefore, keep a perspective of years to maximize your potential returns.

DCA Strategies – How to manage income from work and allocate it to a portfolio of assets?

Those who want to invest monthly with the extra income will find good opportunities in DCA to explore a portfolio of cryptocurrency assets. But for this to work, it requires discipline and a lot of attention.

First of all, it is essential to assess your personal finances. It is crucial to determine an investment amount that does not compromise your essential expenses and that you have an emergency fund set aside. Then, consider defining a strategy for distributing investments based on the information below:

With a fixed amount to invest monthly and the choice of initial assets, simply choose a cryptocurrency wallet, open your account and follow some advice that we have outlined below:

1. Investment allocation: Set a proportion for each asset type in your portfolio (e.g., 50% crypto, 30% stocks, 20% stablecoins). Over time, reevaluate your portfolio to maintain the desired proportions.
2. Track performance: Regularly monitor the performance of your investments and market trends. To do this, use applications and platforms that offer detailed reports and analyses.
3. Adjust your strategies: Be prepared to adjust the amount invested or the distribution of assets as your financial needs change. Adapt your DCA plans to take advantage of new market opportunities or reduce risk.
4. Stay consistent: It’s crucial to stick to your investment plan, even during periods of market volatility. Avoid making impulsive decisions based on emotions or short-term news.
5. Take advantage of market opportunities: Be on the lookout for opportunities to buy assets at low prices during market corrections. Using the DCA strategy to increase your exposure to promising assets is a good alternative.

What costs should I take into account for Holding and DCA?

Investing in cryptocurrencies involves costs. In practice, these costs can significantly impact your long-term returns, so it’s worth paying attention to this topic. Understanding and managing service fees is essential to maximizing profits and avoiding unpleasant surprises.

Tips to reduce costs in your operations

• Compare fees between brokers: research and compare transaction and brokerage fees between different cryptocurrency brokers before making any investment.
• Consider storage costs: evaluate the costs of the main digital wallets and choose one that offers adequate security and at the lowest possible cost for your investment model.
• Check conversion rates: Be aware of conversion rates when exchanging one cryptocurrency for another or when making fiat currency transactions (for example, transferring R$ to Bitcoin).
• Understand withdrawal fees: Check the fees charged when transferring cryptocurrencies from one exchange to another or when withdrawing funds to your bank account.
• Read the T&Cs: Be aware of hidden costs, which are usually only mentioned in the terms of use of brokers or digital wallets, such as maintenance fees or inactivity period.
• Avoid frequent transactions: Reduce the number of transfers to reduce transaction and brokerage costs, especially in holding strategies.

Do holding companies and DCA help combat inflation?

Holding and DCA investments can be effective strategies to overcome the effects of inflation over time, but it is worth remembering that they are not a guarantee that returns will outperform the scenario of a devaluation of a fiat currency. Below, check out three examples of positive scenarios:

Example 1: Holding

• Asset: Bitcoin (BTC)
• Scenario: You decide to buy 1 Bitcoin and hold it for 3 years.
• Initial Investment: Purchase of 1 Bitcoin at R$30,000.
• Year 1: Bitcoin appreciates to R$40,000.
• Year 2: Bitcoin temporarily drops to $35,000 and then appreciates to $45,000.
• Year 3: Market faces volatility, but Bitcoin stabilizes at R$50,000.

Result: At the end of 5 years, your initial investment of $30,000 in Bitcoin has appreciated to R$50,000, resulting in a gain of R$40,000. This appreciation significantly exceeds the accumulated inflation over the period.

Example 2: DCA

• Asset: Bitcoin (BTC)
• Scenario: You decide to invest R$200 in Bitcoin per month for 2 years, using the DCA strategy.
• Month 1 to 6: Bitcoin price varies between R$30,000 and R$35,000.
• Month 7 to 12: Bitcoin experiences a drop to R$28,000.
• Month 13 to 18: Bitcoin recovers and reaches R$40,000.
• Month 19 to 24: Bitcoin maintains stability around R$38,000.

Result : You have accumulated BTC at an average cost per unit lower than the current market price, taking advantage of price variations over time. In addition, the appreciation of BTC over the period exceeds inflation, increasing the total value of your investment.

Example 3: Holding + DCA

• Asset: Ethereum (ETH)
• Scenario: You decide to invest $100 in Ethereum per month for 2 years, using the DCA strategy and holding the investment.
• Month 1 to 6: Ethereum price fluctuates between $2,000 and $2,500.
• Month 7 to 12: Ethereum corrects to $1,800.
• Month 13 to 18: Ethereum recovers and hits $3,000.
• Month 19 to 24: Ethereum maintains stability around $2,500.

Result : At the end of 2 years, you have accumulated Ethereum at an average cost per unit lower than the current market price, taking advantage of price fluctuations over time. The appreciation of Ethereum over the period exceeds inflation, increasing the total value of your investment.

How to record holding company and DCA profits in the tax return?

The cryptocurrency market does not yet have specific regulations in Brazil, but it is important to understand how to declare and record profits in order to comply with your tax obligations. Here are the main steps when proving your profits from investment strategies:

1. Keep records of your transactions: Keep all transaction records, including purchase dates, amounts paid, sale dates, and amounts received. This is essential for calculating capital gains.
2. Calculate the gains: To calculate the value, subtract the acquisition cost (purchase price plus taxes) from the sale price of the asset. If the result is positive, it is a taxable capital gain.
3. Use the tax incidence table: consult the Brazilian tax incidence table to determine the rate applicable to your profits. It is worth remembering that the amounts may vary depending on the length of time the asset has been held in your portfolio.

Example of tax return with profit in holding company and DCA

• You bought 1 EH for R$5,000 and sold it for R$15,000 after 2 years.
• Capital gain: R$10,000.
• If the capital gains rate is 15%, for example, the tax due will be 15% of R$10,000, or R$1,500.

Tips that can help you declare cryptocurrency profits

• Consult a professional: If you are unsure how to properly report your holding and DCA profits, consider consulting an accountant or tax expert familiar with cryptocurrencies and investing.
• Meet filing deadlines: Be aware of tax filing deadlines and make sure you file your return by the deadline to avoid fines or penalties.

Conclusion on holding and DCA

As we can see in this review, holding and DCA are accessible and effective investment strategies for those interested in increasing their digital asset portfolio over time.

Both strategies offer investors the opportunity to accumulate valuable and potentially profitable assets over years, taking advantage of market cycles and protecting against the erosion of purchasing power due to inflation.

In a dynamic and globalized financial environment, holding and DCA are not only simple investment methods, but also powerful tools for those seeking to achieve long-term financial goals with discipline and consistency.

FAQs – Frequently Asked Questions about holding companies and DCA