CoinTN
Many people want to invest in cryptocurrency but are afraid of buying at the peak, or don't have time to watch the market every day. Auto-Invest is a strategy particularly suitable for these people — once the plan is set up, the system automatically buys for you, so you don't have to worry. You can easily set up an automatic investment plan on the Binance official website to benefit in the long run. Using the Binance official APP makes the operation even simpler and more intuitive. Apple users should first check out the iOS installation guide to install the app.
What is Auto-Invest
Auto-Invest, fully known as "Dollar Cost Averaging" (DCA) in traditional terms, means investing a fixed amount of money to buy a certain asset at regular time intervals. For example, automatically buying 100 USDT worth of Bitcoin every Monday, regardless of whether the price at that time is high or low.
The core idea of Auto-Invest is "spreading risk over time." Because you are buying in multiple batches, sometimes you buy at high points and sometimes at low points, and over the long term, your costs will be averaged out. This is the so-called "Dollar Cost Averaging" (DCA) method.
The advantage of Auto-Invest lies in not needing to time the market. You don't have to struggle with the question of "should I buy now," because you buy no matter what the current price is. As long as you believe that the asset will rise in the long run, Auto-Invest can help you achieve good returns.
Historical data shows that those who stuck to DCAing into BTC over the past few years, even if they started at the peak of a bull market, most eventually obtained positive returns as long as they kept doing it.
How to Set Up Auto-Invest on Binance
Step 1: Find the Auto-Invest feature
In the Binance APP, go to the "Earn" page and find the "Auto-Invest" option. On the web version, you can access it through the "Earn" menu.
Step 2: Select the cryptocurrency to invest in
Click "Create Plan" and select the cryptocurrency you want to auto-invest in. You can choose a single coin (like BTC), or create a portfolio to auto-invest in multiple coins simultaneously.
For instance, you can set up a portfolio: 60% of the amount buys BTC, 30% buys ETH, and 10% buys BNB. Such an Auto-Invest plan can cover multiple coins at the same time.
Step 3: Set the investment amount and frequency
Set the amount for each Auto-Invest purchase, with the minimum generally being 1 USDT. Then set the frequency, which can be daily, weekly, bi-weekly, or monthly.
Daily investing is suitable for small amounts but hoping to achieve the maximum cost-averaging effect. Weekly investing is the most commonly used frequency, balancing convenience and effectiveness. Monthly investing is suited for people with fixed monthly incomes, investing according to their salary cycle.
Step 4: Choose the funding source
Select what to use to pay for the Auto-Invest. The most commonly used is USDT, but you can also use BUSD or other stablecoins. Ensure that your Spot wallet has a sufficient balance to pay for future Auto-Invest plans.
Step 5: Confirm and start
After confirming all settings are correct, click "Confirm" or "Start Auto-Invest". The system will automatically execute buy operations according to your set time. You can pause or modify the Auto-Invest plan at any time.
Choosing an Auto-Invest Strategy
Fixed Amount Auto-Invest
The most basic strategy, investing the same amount every time. For example, buying 100 USDT of BTC every week, regardless of price fluctuations.
The effect of this strategy is: you buy a larger quantity when the price is low, and a smaller quantity when the price is high. Over the long term, your average cost will be lower than the simple arithmetic average price.
Volatility-Weighted Auto-Invest
Building upon basic Auto-Invest, this involves increasing the investment amount when the price drops significantly. For example, normally investing 100 USDT a week, but if BTC drops more than 10% within a week, you invest 200 USDT.
This strategy can accumulate more holdings at low prices, improving long-term returns. However, it requires you to have extra cash reserves and the discipline to increase investment during market panic.
Portfolio Auto-Invest
Don't put all your Auto-Invest funds into a single coin. You can allocate it proportionally to several major coins. For example, 50% for BTC, 30% for ETH, and 20% for other coins you are optimistic about.
Diversifying investments can reduce the risk of a single coin. Even if one coin performs poorly, other coins might make up for the loss.
Stepped Auto-Invest
Adjusting the Auto-Invest amount according to changes in the overall market valuation. Invest more when the market is undervalued, and less when it is overvalued. Judging market valuation can reference some macroeconomic indicators, such as the BTC MVRV ratio, Fear & Greed Index, etc.
Important Notes for Auto-Invest
Ensure sufficient account balance
Automatic Auto-Invest deducts funds from your Spot wallet. If the account balance is insufficient when the Auto-Invest time arrives, the execution will fail. It is recommended to regularly deposit USDT into the account, or set a one-time deposit covering several months of Auto-Invest amounts.
Choose the right coins for Auto-Invest
Auto-Invest is only effective when the asset you invest in has a long-term upward trend. If you auto-invest in an altcoin that eventually goes to zero, no matter how you DCA, you will lose money. It is recommended to auto-invest in mainstream coins with large market caps and strong consensus, like BTC and ETH.
Stick to it long-term
The essence of Auto-Invest lies in long-term persistence. In the short term, you might see your account in a loss, especially if you start Auto-Investing at the beginning of a bear market. But as long as you stick with it, you will reap handsome rewards when the bull market arrives.
Many people's problem is stopping their Auto-Invest when taking a loss, and buying a lump sum when making a profit. This is exactly backwards. The correct approach is to persist or even increase Auto-Invest amounts when prices are low.
Set a profit-taking plan
Auto-Invest must have a profit-taking plan. When your Auto-Invest returns reach your expected target (for example, doubling), you can consider selling a portion to lock in profits, while continuing to auto-invest to accumulate new holdings.
Don't be too greedy and think about making more; reasonable profit-taking can ensure your gains are secured in your pocket.
Expected Returns of Auto-Invest
Auto-Invest is not a get-rich-quick strategy; it is a steady long-term investment method. Taking BTC as an example, for someone who stuck to auto-investing 100 USD monthly over the past few years, the return situation is as follows (for reference only, does not represent future performance):
During major upward cycles, Auto-Invest returns can reach 200% to 500% or even higher. In choppy markets, Auto-Invest returns might fluctuate between positive and negative 20%. In the initial stages of a downward cycle, an Auto-Invest account might show an unrealized loss of over 50%. But if you persist until the next upward cycle, you can usually obtain considerable positive returns.
The key is to have enough patience and not give up because of short-term losses.
Auto-Invest vs. Lump-Sum Purchase
The advantage of a lump-sum purchase is that if you happen to buy at the bottom, your returns will be much higher than Auto-Invest. But the problem is that no one can accurately predict where the bottom is.
The advantage of Auto-Invest is that it doesn't require timing the market, reducing the risk of choosing the wrong entry point. For most ordinary investors, Auto-Invest is a more reliable strategy.
Some studies show that in a long-term rising market, the average return of a lump-sum purchase is higher than Auto-Invest, because "the earlier you enter, the better." However, Auto-Invest has less psychological burden and is easier to stick to, so the actual results are often better.
How to View and Manage Auto-Invest Plans
On the "Auto-Invest" page of the Binance APP, you can see all your currently executing Auto-Invest plans. This includes information such as the total invested amount, current holding value, and ROI for each plan.
You can pause a certain Auto-Invest plan at any time (for example, when you need cash), or you can modify the investment amount and frequency, or completely cancel a plan.
It is recommended to check your Auto-Invest plans every one or two months to see the returns and execution status, and make appropriate adjustments based on your financial situation.
Frequently Asked Questions
What is the minimum amount for Binance Auto-Invest?
The minimum amount for a single Auto-Invest transaction is generally 1 USDT, but it depends specifically on the selected coin. Some coins might have a slightly higher minimum subscription amount.
Where is the money for Auto-Invest deducted from?
It is automatically deducted from your designated payment currency (such as USDT) in your Binance Spot wallet. Ensure your account balance is sufficient, otherwise, the Auto-Invest will fail to execute.
Where are the coins bought through Auto-Invest kept?
The coins bought through Auto-Invest will automatically be stored in your Spot wallet. Some Auto-Invest plans might support automatically depositing the purchased coins into Earn products to earn extra yield, depending on your settings.
Can I auto-invest in multiple coins at the same time?
Yes. You can create multiple independent Auto-Invest plans to invest in different coins separately. You can also create a portfolio plan to invest in multiple coins proportionally in a single operation.
Should I continue Auto-Investing during a bear market?
Yes. A bear market is exactly the golden period for Auto-Investing, because prices are low and you can buy more coins with the same amount of money. Many long-term investors stuck to Auto-Investing during bear markets and reaped handsome rewards in the next bull market. Of course, the prerequisite is that you are auto-investing in valuable mainstream coins, not small coins that might go to zero.