What a crypto savings plan really does

A savings plan buys a fixed amount at fixed intervals. Because the amount stays the same and the price does not, you receive more units when prices are low and fewer when they are high. That is the cost averaging effect. It concerns the entry price, not the risk of the asset you bought.

What cost averaging actually does

The effect does exactly one thing: it spreads the moment of entry over many dates instead of staking everything on one. That lowers the chance of putting the whole amount to work on the most expensive day of a year, and equally the chance of putting it to work on the cheapest day.

Three things it does not do. It does not reduce the price swings of the asset bought: according to figures from the Bank for International Settlements, Bitcoin and Ether lost around 75 per cent in 2022, regardless of how many steps anyone bought in. It does not reduce the risk of total loss: if an asset goes to zero, every single instalment goes with it, and the joint warning issued by ESMA, EBA and EIOPA, the three European supervisory authorities, on 17 March 2022 names exactly that complete loss as a real possibility. And it is not a source of return. A savings plan is a buying technique, not a protective mechanism.

What the figures on regular buying show

The Bank for International Settlements worked through this very case in Bulletin no. 69 of 20 February 2023. The basis is a data set covering more than 200 trading apps in 95 countries from August 2015 to the middle of December 2022. The assumption in the simulation: every new user buys 100 US dollars of Bitcoin in the month of the first app download and in every following month.

The result up to December 2022: more than four fifths of these users would have made a loss. The median user would have lost 431 US dollars, close to half of the 900 US dollars paid in. A second figure from the same analysis explains why. Almost three quarters of users downloaded a trading app only once Bitcoin traded above 20,000 US dollars, and user numbers picked up on average around two months after price rises.

Two qualifications belong with this. It is a model calculation with fixed assumptions, not a measurement of real account balances. And it ends in December 2022, so it says nothing about later or future periods. What it does show is that buying regularly in a falling market produces a loss in the same way a single purchase does. The measured swings are set out in the article on the volatility of Bitcoin.

Single purchase and savings plan side by side

The difference lies less in the outcome than in the process, in the number of transactions and in the duties that follow from them. The table below puts the two routes next to each other.

What each instalment triggers for German tax

This section describes German tax law. If you are taxed in another country, your own rules decide and this text does not cover them. Under the circular of the German Federal Ministry of Finance of 6 March 2025, crypto-assets are other assets within the meaning of section 23 (1) sentence 1 no. 2 of the German Income Tax Act (Einkommensteuergesetz); the German Federal Fiscal Court (Bundesfinanzhof) confirmed this in its judgment of 14 February 2023, case IX R 3/22. For you that means every instalment is a separate acquisition with a separate period of one year. With twelve instalments, twelve periods run side by side.

Under section 23 (3) sentence 5 of the Income Tax Act, gains from private disposals stay tax free where the total gain in the calendar year comes to less than 1,000 euro. That is an exemption limit, not an allowance: at a gain of exactly 1,000 euro the whole amount becomes taxable, not just the part above the line. The extension of the period to ten years under section 23 (1) sentence 1 no. 2 sentence 4 does not apply to currency and payment tokens, per margin number 63 of the same circular.

On a sale the question is which instalment counts as sold. Margin number 61 of the circular allows the crypto-assets of a trading designation acquired first to be treated as sold first, that is FIFO, and it does so wallet by wallet. The method once chosen must be kept within a wallet. The periods start again after every swap, including a swap of one crypto-asset for another. When each instalment comes free is worked out by the holding period calculator.

What twelve instalments a year cost

Costs arise on every purchase, not once a year. A German consumer advice centre puts the principle plainly: costs are certain, returns are not. So work out before the first instalment what is left over.

A worked example with assumed figures, not with market data: at an instalment of 100 euro and a fee of 1 per cent you pay 1 euro per purchase and 12 euro a year. At 1.5 per cent it is 18 euro, at 2 per cent 24 euro. On top of that comes the spread, the gap between the buying and the selling price, which sits inside the quoted price and is rarely shown separately. With small instalments a fixed minimum charge per execution weighs especially heavily: a minimum fee of 1 euro is 4 per cent on an instalment of 25 euro and 0.5 per cent on an instalment of 200 euro. So ask before you sign up about the fee per execution, the minimum fee, the spread and the cost of withdrawing. The entry price across all instalments is worked out by the average cost calculator.

Five mistakes that make savings plans expensive

The first mistake is setting one up after a strong price rise. The data from the Bank for International Settlements show exactly that pattern: user numbers picked up on average around two months after price rises, and almost three quarters of users started at a Bitcoin price above 20,000 US dollars.

The second mistake is stopping during a fall, that is selling precisely when the instalments are worth least. The third is an instalment too large for the household budget, which then has to be cancelled at the next tight month. The fourth is collecting across several wallets, which makes the allocation on a sale harder, because under the German circular the consumption sequence is applied wallet by wallet. The fifth is the missing record: without date, amount, price and fee for each instalment, a gain or loss cannot be explained cleanly later, and in Germany the duty to cooperate falls on you, not on the trading venue.

What to settle before the first instalment

A German consumer advice centre names two points that come before any investment. First the reserve: a buffer of two to three monthly salaries for unexpected costs belongs in an account you can reach at any time. Second the debts: paying off debt comes before investing, because credit as a rule costs more in interest than the same sum can earn. On cryptocurrencies the same source writes that they are not suitable as an investment.

Then settle four questions for yourself. How long can you do without the money, without having to touch it? What happens to your household if the value of the instalments stands 75 per cent lower after a year, as was the case in 2022? Can you write off the entire amount paid in without it affecting your plans for life? And can you keep the records over years so that for each of the twelve instalments you can evidence date, amount, price and fee? Anyone who cannot answer one of these clearly should not set the instalment up. How large a share can be at all is covered in the article on the crypto share of a portfolio.

Frequently asked questions

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