Which Bitcoin Strategy Works Best Regardless of Price?

Which Bitcoin Strategy Works Best Regardless of Price?

Bitcoin (BTC) fell more than 55% six months after reaching a record high of $ 69,000 in November 2021.

This huge drop has left investors screaming whether to buy BTC when it’s cheaper, around $ 30,000, or wait for another fall in the market.

The more you look at Bitcoin price history, the more you might think that it is not the bottom line. After 190 days of the all-time high, bitcoin still had 150-200 days before it hit the bottom in the last two cycles (red box). If time is an indicator, it could be another 6-8 months – Rager (@Rager) May 20, 2022.

This is mainly due to lower interest rates, despite the recent 0.5% increase in Federal Reserve rates. Meanwhile, cash held by global fund managers jumped 6.1% to $ 83 billion, the highest level since the September 11, 2001 attacks. , assets and hedge funds, according to the latest data. from Bank of America.

Many cryptocurrency analysts, including Carl B. Menger, see better buying opportunities in the bitcoin market as its bottom price seeks.

But instead of proposing a lump sum investment (LSI), in which investors spend huge sums down to enter a market, there is a safer alternative for the lay investor, known as “dollar cost averaging”, or DLP.

Bitcoin’s DLP strategy can beat 99.9% of all asset managers

The DLP strategy involves dividing investors’ cash holdings into twelve equal parts and buying bitcoins with each share each month. In other words, investors buy more BTC when their prices fall and less of the same asset when their prices rise.

To date, this strategy has yielded incredible results.

For example, a dollar invested in bitcoin each month after its peak in December 2017 – nearly $ 20,000 – yielded a cumulative return of $ 163 for investors, according to DL CryptoHead calculator. This means a return of around 200% for constant investments.

DLP Bitcoin Calculator. Source: CryptoHead

DLP’s Bitcoin strategy also stems from the notion that BTC’s long-term trend will always remain on the upside. Menger argues that investors could “beat 99.99% of all managers and investment firms on planet Earth” by regularly buying Bitcoin for a certain amount.

This chart says it all. #Btc DLP is the smartest and most effective way to hit the market #bearmarket – ahmad (@ albazzi02) May 13, 2022

Defects in the DLP strategy

However, historical results in traditional markets do not confirm that the DLP strategy is the best investment strategy. Conversely, the LSI strategy is preferable.

For example, a 60/40 portfolio study by Vanguard, which looked at all 12-month periods from 1926 to 2015, showed that DLP’s all-in-one investments exceeded two-thirds of the time, averaging 2. 4% on a calendar year.

See also: Bitcoin Ends “On the Wire” Week as S&P 500 officially enters Bear Market

This increases the possibility that bitcoin, which has a positive daily correlation with the S&P 500 benchmark 0.96 in May, will show similar results between its DLP and LSI strategies in the future.

So, regular investments in bitcoin with a fixed amount of money do not always lead to better profits than the “all-in” method.

BTC / USD daily price chart. Source: TradingView

But what about the combination of the two?

Larry Swedroe, director of research at Buckingham Wealth Partner, thinks investors should invest with a “semi – full glass” attitude, which means a combination of LSI and DLP.

“Invest one-third of the investment immediately and one-third at a time over the next two or two quarters,” wrote the analyst at SeekingAlpha, who said:

“Invest a quarter today and invest the rest, spread evenly over the next three quarters. Invest a sixth every month for six or two months.”

The views and opinions expressed herein are those of the author only and do not necessarily reflect the views of All investment and business transactions involve risk. You should do your own research before making a decision.

May22, let’s celebrate Bitcoin Pizza Day, you know?

May22, let’s celebrate Bitcoin Pizza Day, you know?

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