On this Wednesday, August 31, 2022, bitcoin continues its descent into hell. The $20,000 is becoming increasingly difficult to preserve and the macroeconomic situation does not seem to be improving. More cases of the bull trap are confirmed. Despite everything, bitcoin takes almost 2% today and ETH more than 4%. So in this article I will support my view on the market while presenting techniques for long-term winning in the world of cryptoassets and investing in general. An excellent read!
A strong trend
On the 4-hour time unit, there is a majority of sellers who control the market.
It makes more sense for me to be here for the long term than to reverse the trend in the short term. There appears to be scope to regain momentum before resuming the underlying trend. It is always better to stop your future jobs with leverage.
Majority of investors at a loss
Bitcoin investors realize a total of $220 million per day in net losses. For long-term spot investment, it is in these zones and in this “cold” atmosphere that one wants to invest.
On a relative scale, this figure is quite modest, especially compared to the recent multi-billion dollar capitalizations.
The bear market of 2022 continues and is still damaging. This shows the strong downturn we are in.
Investor psychology remains very weak due to an unfavorable macroeconomic context and liquidations that do not seem to be stopping. Considering the extremely low active user base at the moment, the $20,000 level can be considered impressive so far.
DCA as a long-term investment
In order not to be at risk for too long, a strategy is often brought to light, the DCA (Dollar Cost Averaging). This involves diluting the purchase price of an asset at regular intervals to build a position. This is one of the most powerful and easiest investment strategies for individual investors. Recurring fixed-amount (or DCA) purchases allow you to:
- Build a position over time, even if you don’t have a large sum of money to invest.
- Don’t worry about market volatility and watch your charts every day.
Example of DCA on the S&P500
The SP500 is the stock market index that tracks the 500 largest publicly traded companies in the United States. One of the most followed indices to get the current state of the market. With an annual rate of return of around 6% over the past 80 years, you can’t go wrong betting on the SP500.
Sure, the stock market has its ups and downs, but if you stick with it long enough, the numbers go up and in the right direction.
But how has this strategy performed over time?
To answer this question, we need to clarify our investment strategy:
- We invest a fixed amount of $500.
- We do this on the first day of every month.
- Let’s say you started using this strategy in 2012. We want to know three things:
- Performance of the periodic buy strategy on the SP500 since 2012.
- The total amount of money you have deployed on this job is $64,000. You entered the average price of 2,567 on the index.
- Your total return in 2022 is 65%, which means a net profit of over $40,000.
It’s not so bad. But as you can see, the result of this strategy is not a straight line up either.
Two lessons to take away from this:
Investing involves risk. There is no magic strategy that is a winner every time.
Panic selling is not a good strategy, the SP500 has recovered. Time in the market is more important than timing the market.
That is why other DCA techniques can be considered. In particular based on an indicator:
- Buy when the fear and greed index is below 20%;
- Buy on MM pullback (Moving Average 150 or 200).
- Buy after a reduction of more than 70%
Therefore, with these techniques, you will have fewer purchases, because the conditions are rare, but it will provide you with highly sought after and often profitable entry points in the long term. More information about DCA in this article.
That’s it for today’s article. I tried to cover as many points as possible and focus more on the traditional market leading cryptos. Talking about altcoins here makes a lot less sense than macro analysis to me.
Finally, I get numerous questions asked on the site where I analyze my values. Personally, and for many years, I am using TradingView, an intuitive interface with many tools and a wide selection of assets. It is clearly the most advanced and widely used interface on the market.
This is the end of this analysis, feel free to give me feedback on my Twitter account @0cakin. Don’t be too fat, take profits regularly, be successful money management for your trades and depending on your initial plan. Only invest what you can afford to lose as long as it doesn’t affect your morale too much. Have a great week everyone, and I’ll see you next week for a new analysis!
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I am passionate about technical and technological analysis, I have been enthusiastically following cryptocurrencies since 2017. Besides trading and investing, I try, in my own way, to democratize the ecosystem that will change our habits of tomorrow!