Short answer: in every crash we tested, pausing a dollar cost averaging plan during the bear market and waiting for prices to recover left the investor with less money than simply continuing. The gap ranged from about 5% in the mild 2022 stock bear market to about 35% in Bitcoin's 2022 crash, with the same total amount of cash put in.
That is the mechanical reason DCA works at all: a fixed amount buys more units when prices are low. Pausing during a crash skips exactly the cheapest purchases of the whole plan.
How we tested it
We replayed a plan of $100 on the first trading day of every month, using the same daily price data as our DCA calculators (dividend-adjusted closes for SPY), and valued every plan at the last close of October 2026 (30 October for SPY, 31 October for Bitcoin). For each crash we compared three investors who put in exactly the same total cash:
- Kept buying. $100 every month, no matter what.
- Paused, then caught up. Stopped buying the month after the market peaked and saved the $100 a month instead. When the price got back to its old peak, they invested all the saved cash at once and carried on.
- Paused and kept the cash. Same pause, but the saved money stayed in cash (at 0% interest, to keep the comparison simple).
The paused investors are generous versions of real behaviour: they knew the exact peak and the exact recovery date, which nobody knows at the time.
The results
The 2008 financial crisis (S&P 500 via SPY)
SPY peaked on 9 October 2007 and fell 55% to its low on 9 March 2009. On a dividend-adjusted basis it didn't close above the 2007 peak again until 16 August 2012. Plan start: January 2007.
- Kept buying: $23,800 in, worth $110,208.
- Paused Nov 2007 to Aug 2012 (58 skipped buys), then caught up: worth $98,966, about 10% less.
- Paused and kept the cash: worth $65,045, about 41% less.
The 2022 stock bear market (SPY)
SPY peaked on 3 January 2022, fell 24.5% by 12 October 2022, and recovered on 13 December 2023. Plan start: January 2021.
- Kept buying: $7,000 in, worth $11,202.
- Paused Feb 2022 to Dec 2023 (23 skipped buys), then caught up: worth $10,608, about 5% less.
- Paused and kept the cash: worth $9,110, about 19% less.
Bitcoin's 2018 crash
Bitcoin peaked on 16 December 2017 and fell 83% by 15 December 2018. It closed above that peak again on 30 November 2020. Plan start: January 2017.
- Kept buying: $11,800 in, worth $99,258.
- Paused Jan 2018 to Nov 2020 (35 skipped buys), then caught up: worth $76,448, about 23% less.
- Paused and kept the cash: worth $65,534, about 34% less.
Bitcoin's 2022 crash
Bitcoin peaked on 8 November 2021, fell 77% by 21 November 2022, and recovered on 4 March 2024. Plan start: January 2021.
- Kept buying: $7,000 in, worth $12,653.
- Paused Dec 2021 to Mar 2024 (28 skipped buys), then caught up: worth $8,163, about 35% less.
- Paused and kept the cash: worth $7,853, about 38% less.
Why pausing costs so much
A bear market is the stretch of the plan where each $100 buys the most. In the Bitcoin 2022 example, the investor who kept buying ended with an average cost of about $42,840 per BTC. The one who paused and caught up paid about $66,400, because their catch-up money went in at roughly the old peak price instead of near the bottom.
Waiting for the price to "get back to where it was" sounds cautious. In practice it means buying again only once the discount is gone. The deeper the crash, the bigger the discount you skip, which is why the Bitcoin pauses cost more than the stock ones.
Keeping the saved money in cash is worse still, because that money never gets the recovery at all. Interest on the cash would narrow that gap somewhat, but nowhere near enough to close it in these examples.
When stopping does make sense
The data says pausing for market reasons has been costly. Stopping for personal reasons is a different question, and often the right call:
- You need the money. If a job loss or an emergency means you would have to sell later to pay bills, stop the contributions. DCA money should be money you won't need for at least five years.
- Your reason for owning the asset has changed. DCA removes the question of when to buy, not what to buy. Averaging into an asset that never recovers just loses money on a schedule. The S&P 500 has recovered from every bear market so far; a single coin or company may not, as our Bitcoin DCA loss study shows for shorter plans.
- The amount was too big from the start. If a crash makes the payments painful, lower the amount rather than stopping. A smaller plan you keep beats a larger one you abandon.
How to keep going when it feels wrong
- Automate the buy so continuing is the default and stopping takes effort. Our step-by-step DCA guide covers the setup.
- Look at the number of units, not the balance. In a crash the balance falls, but the units you own grow faster than in any other phase of the plan.
- Check less often. A plan reviewed once a year doesn't need a decision every time the market drops.
- Write down your rule now, while markets are calm: "I keep buying unless I need the money." Decisions made in advance hold up better than ones made during a 50% drop.
You can replay any of these periods yourself with the backtesting tool, the S&P 500 DCA calculator or the Bitcoin DCA calculator.
FAQ
Should I stop dollar cost averaging during a bear market? Historically, no, if the money isn't needed and the reason for owning the asset still holds. In four crashes we tested (SPY 2008 and 2022, Bitcoin 2018 and 2022), pausing until prices recovered left investors about 5% to 35% behind those who kept buying the same total amount.
Is it better to keep the money in cash and invest it when the market recovers? In our tests, no. Investing the saved cash at the recovery point was still 5% to 35% worse than continuing, because the catch-up money went in near the old peak price instead of near the bottom.
Does DCA work if the market keeps falling? DCA lowers your average cost as prices fall, but it can't make a losing asset profitable. If the price never recovers above your average cost, the plan loses money. That is a question about what you buy, not about the schedule.
When should I stop DCA? When you need the money, when your reason for owning the asset has changed, or when you reach the goal you were saving for. Market drops alone have historically been the worst time to stop.
Should I increase my DCA during a crash? Buying more when prices are low has helped in hindsight, but it is a form of market timing and depends on having spare cash. A fixed amount you can sustain is the safer default; extra buys should come from money you genuinely won't need.
