Bitcoin - DCA - The best strategy for most

Dec 27, 2020

In this publication, I want to make a case for Dollar Cost Averaging (DCA) and explain why for most traders, it is by far the most profitable strategy. Rather than buying and selling BTC whenever you see a potential top or bottom, or trade with leverage.

Let's travel back in time to the end of 2017, everybody is talking about bitcoin and this is how you heard about it. You get very excited about it, but you don't want to analyse markets, you want to invest in this coin because you believe it has a promising future. So you decide that you will put 100$ in it every month on the first day of the month and not look back, starting on Jan 1st 2018, pretty much at the top of BTC price.

Bitcoin starts its decline, hovering some time around 6000 USD/BTC, but you keep investing, because you are smart and understand that you will get even more sats (1/100.000.000 BTC) for your dollar. More bang for the buck as it were. You just stick to your 100S/month investment plan, even through the dip to the 3500/BTC lows in Jan/Feb 2019.

So how much BTC would you have by now, how much would you have invested and how much would it be worth after (almost) 3 years ... In other words, what is your ROI ?

Total investment : 3600 USD
Total BTC accumulated : 0.48910342
Current Value : 13450 (BTC price of 27500 USD/BTC)
ROI : 274%

So, even though you started buying BTC, pretty much at the previous top, you still managed to get a return of 274% over a 3 year period. Now, tell me how many actively trading people will have made that return, even with leverage ?

Q : Is it too late starting to invest 100/month in BTC now that we have reached current prices ?
A : Keeping in mind the current demand for BTC, mainly from institutional investors, the future for BTC is looking bright, and chances are that we'll even exceed those 274% in 3 years. The S2F and S2Fx models from PlanB predict a bitcoin price of somewhere between 100.000 and 288.000 USD/BTC by the end of 2024. Worth investing 100/month ?

Please note that this is not financial advice, do your own research and only invest money that you can afford to lose. Keep in mind that past performance is no guarantee for the future.

Thanks for sharing your thoughts in the comments below, and if you found this useful, give it a like.
Hope to see you back soon.

Happy New Year and all the best wishes for 2021 and beyond!

Dec 27, 2020

Comment

I know ... There is no fun in dollar cost averaging, it is pretty boring. Nobody will congratulate you on an "excellent entry" or an "awesome trade" ...
However, if you consider that more than 90% of traders lose money (numbers vary, but this is overall accepted), and that dollar cost averaging has basically proven it's efficiency and outperforms even many established hedge funds .... Maybe it is something to "set and forget" and do some other, more interesting things with the time gained ?