Square founder Jack Dorsey is aiming to make it easier for small investors to buy bitcoin in CashApp by setting up regular daily, weekly, or biweekly purchases at a set dollar amount.
Announced on May 18, Cash App’s new Auto Invest feature brings an investment strategy called dollar-cost averaging to the payments app for as little as $10 a month. Basically, dollar cost averaging is a long-term investment strategy aimed at investors with little risk tolerance, in which a set dollar amount of assets like stocks are purchased on a regular basis.
“You don’t need perfect timing if you’re thinking long-term,” the Cash App website notes. “By spreading purchases out, you can minimize the impact of market swings.” The Auto Invest feature is also available for stock purchases.
Positive response
Twitter founder Dorsey has been an increasingly high-profile Bitcoin supporter, adding a Square Crypto division to the payments app company and enabling BTC purchases and sales right in Cash App. That has been a successful strategy, with Bitcoin accounting for half of its $361 million net revenue in the fourth quarter of 2019.
Beyond that, research showed almost a quarter of all bitcoins mined in the first quarter of 2020 were sold through Cash App.
Dorsey was No. 5 on the Modern Consensus list of the 100 Most Influential People in Crypto for 2020. In April, he announced he was giving away $1 billion to research on COVID-19, girls’ health and education, and universal basic income advocacy.
So far, the feature has gotten a generally positive response in the Twitter cryptoverse, with asset management firm VanEck’s digital asset director, Gabor Gurbacs, tweeting “[a]utomatic dollar cost averaging makes sense to me. Good feature!” Dan Hedl, director of business development at the Kraken exchange, chimed in with “very nice.” And investor Ian Balina, founder and CEO of crypto research firm Token Metrics added, “Very bullish.”
Still, there were some complaints about prices higher than at other companies offering dollar-cost averaging.
Onboarding cryptocurrency investors
However, it’s worth remembering that Cash App is a decidedly mainstream payment app with 24 million users, making the new feature a user-friendly way for people interested in Bitcoin investing but unsure how to start navigating exchanges and digital wallets.
The instructions are just five very simple steps long: go to CashApp’s bitcoin investing screen; tap “buy;” select the frequency of purchases from the drop-down menu that says “One Time Purchase;” choose a set or custom dollar amount to invest; and tap confirm.
Buy low, buy high
However, dollar-cost averaging has a number of critics. The problem, according to Pinnacle Advisory Group Partner Michael Kitces, is that the strategy mitigates risk by purchasing more of a stock for your money when the stock goes down.
“It’s kind of a nice theory,” he said in a 2016 Morningstar video. “The challenge for dollar-cost averaging… [is that markets] go up more than they go down. What we ultimately find is about a quarter of the time dollar-cost averaging wins and the other three quarters of the time it loses.”
Which means, ultimately, in the cryptocurrency market, dollar-cost averaging is a bet that Bitcoin’s wild price swings will continue.
Updated 9:17 p.m. on June 22, 2020 to insert a space between Cash and App.
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