Below is a copy of my earlier attempt at a response to the matter (although my nested response is directed at birr, it is also intended for Rosewater, and I am not sure if he read it), and in essence I am saying that reverse dollar cost averaging is stupid.
Sure you can sell a chunk of BTC if you are nervous about whatever situation you have gotten yourself into, but you need to go back to the strategy of buying on the way down and selling on the way up because it does not work to attempt dollar cost averaging the other way around... and sure, sometimes when in doubt an alternative plan (especially in BTC) would just be to HODLCRAEFULly through the situation.
But what you are arguing there is that it is basically a wrong idea to exit low. Which we all agree. But he was especifically asking if it was better to exit (now) in a single trade or to dollar cost average the exit. The intention to exit was thus a premise in his question.
Here is one time that I will concede (it does not happen very often) that the wordiness of my response may have caused a loss of the thrust of what I was attempting to say.
Pretty much I was attempting to say that if you believe that you have fucked up, and you want to feel comfortable because you believe the price is going to go down, then you should figure out a way to sell a chunk that will cause you to become more comfortable, and then continue with a strategy of buying on the way down and selling on the way up (and that would not be dollar cost average selling on the way down because that makes little fucking sense in light of the more grande principle that calls for buying on the way down and selling on the way up).
I understand the premise and intention of his question, and I think that the strategy goes against the overall principle that I would be advocating.
Of course, we are kind of mixing two principles here, because dollar cost averaging does not really have anything to do with price, and dollar cost averaging is a time thing... so following a pure dollar cost averaging strategy would be to just buy or sell an exact amount (perhaps once a week) no matter what the price was at that time, and I am not opposed to that kind of strategy; however, the way that Rosewater was using the term, he seem to be referring to selling an incremental amount on the way down (irrespective of time), and just to be clear and repetitive, I think that is a stupid and even a strategy that is contrary to MORE GRAND principles to buy on the way down and sell on the way up.
As such, it is better to do it averaging the exit for exactly the same reasons it is good to average the entry.
For reasons already outlined above, I don't think so.
I also suggested an alternative way which is scalping the volatility for liquidity (you basically assume downtrend and act accordingly in the staggered trades using the volatility to get an additional profit ie: sell double on each daily pump and buy half on each daily dip). But it all depends on the deadline someone has to complete the full exit.
Actually, you are describing a little bit different of a principle, and I cannot really disagree with this kind of mitigation/compromise strategy because you can tailor such an approach to make the downside less painful than it might otherwise be, and thereby cause you better downside protections because you are attempting to ensure that you are not selling at the absolute bottom... so I agree with that kind of attempt at mitigating damages to the best of your ability (that kind of is hoping that the bottom is close to being in).
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