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Author Topic: Bitcoin Dollar Cost Average Strategy Update  (Read 156 times)
crypmike
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December 10, 2018, 08:33:07 PM
 #1

interesting post by BitcoinBravado

Introduction

Between the 13th and 28th of October 2017 Bitcoin consolidated between $5400 and $6200 before its massive uptrend towards $20,000. After breaking upward $BTC later retested this order block one more time in November, falling from $8000 to $5500. From there, it took $BTC only 5 weeks to reach $20,000.
The consolidation level mentioned was revisited a mere 8 weeks later. Bitcoin lost 50% of its value in two weeks, dumping from around $12,000 to sub $6000. The reaction to this level was so strong that it served as a bottom up until 2 weeks ago. Bitcoin bounced off the $6000 level around 6 times, with each subsequent bounce becoming weaker and weaker. Anyone who longed crypto around the $6000 level returned very well in 2018. Now that this level has broken down, we need to look to a new structure in the market and come up with a strategy to trade it profitably.


The Descending Triangle

Once the descending triangle broke down, it served as confirmation that the whole triangle had been "distribution." Savvy traders and significant market players shorted Bitcoin into the low $6000 region and then closed these shorts, creating shorter-lived rallies. In general, as descending triangles break down, their targets, for the conclusion of the triangle, are the percentage from the top of the triangle to the bottom of the triangle, added to the breakout.
Simply put: if the triangle from top to bottom saw a price decrease of 50%, the target lies around 50% below the breakout level ($6000). We believe this to be the case for Bitcoin and this image speaks a thousand words:





The Halving – A Look Ahead

We think that by 2021, Bitcoin will likely see a new all-time high. This is based on market cycle analysis of historical speculative, innovative assets (like Gold) and the history in which Bitcoin has behaved itself in regards to the so-called halving.
The halving of Bitcoin is a specific moment in the creation of blocks on the Bitcoin chain where the reward for miners to mine Bitcoin blocks gets reduced. On average this happens every 4 years. We had the first halving in 2012, the last one in 2016. The next halving is expected to occur around May 2020. As the rewards decrease 50% on each halving, the amount of newly mined Bitcoins entering the market becomes significantly less. In the current period, ~1800 Bitcoins enter the market daily. After the next halving, this will become ~900 a day.

Historically, the halving led the start of a new or continued bull market:





Dollar Cost Averaging

Nobody can say for sure what the exact bottom will be until it's well in the past. This is why buying 'spot Bitcoin’ (non-leveraged long positions at market value) on the way down can be a risk-averse strategy for scaling into a long-term position. This technique that we have mentioned time and time again is called Dollar Cost Averaging or in short DCA. When one uses DCA, they 'ladder buy' all of their orders on the way down, adding to the position at specific timeframes, price levels or decline percentages.
As this bear market has in no way changed our long-term outlook for Bitcoin, future prices at least surpassing all-time-highs (~$20,000), we believe that buying Bitcoin at and below current levels ($3,500 at time of writing) has a reasonable probability of becoming a profitable decision. If our long-term outlook becomes a reality, an average entry at these levels will return a gain of at least 700% as BTC approaches its all-time high and beyond. Please remember, this is highly speculative, and past performance is not a guarantee of future results. Bitcoin may never increase in value again, we just don't think that's likely.
The advantage of Dollar Cost Averaging is that you don't have to guess precisely where the bottom will occur. Our approach at this time is to invest 50% of our intended fiat investment stack, in increments, starting at levels where we think Bitcoin is a steal long-term and levels that we believe a bottom for $BTC could be printed.
The other 50% of our investment stack is reserved for either one of two scenarios:

Scenario A - We completely misjudge the potential bottom and Bitcoin reaches its ‘worst- case scenario’ level. In this scenario, we have 25% of our reserved capital waiting to enter at insanely low levels and another 25% reserved for deployment upon confirmation of trend reversal.

Scenario B - If we see signs of a trend reversal and our bias turns back to bullish, then at this point we will use our DCA strategy on the way up instead. As it currently stands, we believe a reversal in trend would be confirmed when we see a weekly close above the $6000-6300 range. We will then add the remainder of our fiat investment stack to our position on retraces into important support structures.





Our DCA Target Entries
We will start DCA'ing just under our recent lows between $3500 - $3700. Our analysis tells us that $2950-3200, when reached, is a level that should see a lot of trade volume and is a price that we think in the long term will see great returns (2020-2021), thus evidently this is our next target range.
The next level of interest will be $2400-$2625, which represents our teams "consensus bottom." This is the level we feel represents the highest probability of serving as a bottom for this cycle.
The worst-case scenario in our opinion is that Bitcoin retraces to $1120, to completely retrace its breakout from the 2013 ATH. We are spreading 25% of our bids throughout these "lower probability" ranges just in case. If Bitcoin were to trade anywhere below $850 (extremely unlikely in our estimation), it becomes questionable what the future of Bitcoin is.
The fiat that ends up not being used, if specific ranges are not visited, will be added as we see trend reversal signs. True signs of a macro trend reversal would be a weekly close above $6000-6300. We will then re-evaluate and update this strategy as to where we will place our remaining bids.

Higher Probability Levels: 50% total
7.5% - $3500 - $3700

17.5% - $2950 - $3200

25% - $2400 - $2625

Lower Probability Levels: 25% total
5% - $1825 - $2000

5% - $1650 - $1825

5% - $1340 - $1440

5% - $1120 - $1340

5% - $900 - $1120





Final Words

Make sure to tune this strategy to your own circumstances and never overexpose yourself to the market. Overexposure leads to poor emotional decision making and can lead to high levels of stress and financial losses. No one knows exactly where this market is headed, but with proper risk management and a disciplined approach to dollar cost averaging, we believe that the future is going to be friendly to those who stick around through the bear cycle of 2018.

As much as we all wish this bear market to conclude and to regain the feeling of immense returns like we were able to experience throughout the majority of the last few years, we have to let this market cycle play out and remain disciplined and patient. With infrastructure being built every day and the outlook for 2019 and 2020 is focused on institutional products becoming available, the possibility to gain exposure to a new group of investors is high, and it is precisely that what is required to reach new all-time highs.
We are happy to have you with us on this journey to inspire, teach, learn and entertain each other on a daily basis to continually improve ourselves. As we live, breath, eat and sleep cryptocurrency, we will together rise from the slumps of this market.




Moй twitter — https://twitter.com/CrypMike

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coolcoinz
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December 10, 2018, 09:41:41 PM
 #2

This would fit better into speculation or trading discussion.

It's a good strategy, although only viable if Bitcoin keeps its popularity and market position. If you keep averaging up to the point of the worst case scenario (1000) and go below, what then? It's a very improbable scenario, but so was going below 5800 when we got our April higher low, followed by a reversal candle. When we were nearing 9000 dollars and you were to ask for predictions, 90% of people would tell you that bull market is back. The majority is always wrong and 90% of traders get fucked by the market.

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December 10, 2018, 09:47:37 PM
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I think that bitcoin will reach the price of 3000 dollars in 2018.

The graph shows that we are moving down and in March 2019 the price of bitcoin should start to rise

Oniko
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December 10, 2018, 09:52:39 PM
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How tired I am of this market decline ...  Sad

I am waiting for the bulls to come to the cryptocurrency market and show their strength.

Do you think this could happen in 2019?
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December 10, 2018, 10:14:32 PM
 #5

Good summary and overall strategy description is also given in a streamlined method. I hope it will help some people to understand the power of cost averaging technique. The issue is that, not everyone understanding this opportunity phase. And those who are already neck deep in cryptospace, are panic selling without looking at the bigger picture which leads to further decline in price.

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December 10, 2018, 10:44:41 PM
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I like it, but my best strategy is to keep buying and saving up. I spend only in bull market and use the bear market to get more. I kept selling all the way from 10 to 20k and then down to 10k, at which point I considered BTC oversold and stopped.

Since 10k I'm accumulating again and getting at least $200 worth of BTC every month + the signature money that is maybe another $100. What is the probability of BTC going back to at the very least 50% of ATH? IMO very high, much higher than your odds in gambling.
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December 10, 2018, 11:11:54 PM
 #7

nice work out there, but I gotta disagree with one point.

1- The triangle target is a bit off, not sure how you trying to mark it, but my guess is that you are using a measure tool which uses % and this pretty wrong. the target of the triangle needs to measured in Length out of the Log scale, that would be around 1100.

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