Bitcoin and DCA w/ Results

[ImThour]

Bitcoin DCA Strategy Comparison

I was thinking about making a post on DCA. For the post, I will use these variables.

- Strategy 1 (Buying Every Month)
Amount to DCA: $100 per Month
When to Buy: 1st of Every Month
Duration: 1st Jan 2015 to 1st April 2022

- Strategy 2 (Buying on Monthly Red Candles)
Amount to DCA: $200 per Buying
When to Buy: Red Monthly Candle
Duration: 1st Jan 2015 to 1st April 2022


I made a Python code using CoinGecko Historical Data to get the information for Strategy 1.


For Strategy 2, I made a list of dates which had red candle, everything else was same.


Results:

- Strategy 1:
No. of Buyings: 88
Amount Invested: 88x100 = $8800
Amount of BTC Own via Strategy 1: 8.079 BTC
Cost per BTC: 8800/8.079 = 1089.24
Current Profit: 8.079 * 43000 - 8800: $338,597

- Strategy 2:
No. of Buyings: 39
Amount Invested: 39*200 = $7800
Amount of BTC Own via Strategy 2: 6.268 BTC
Cost per BTC: 7800/6.268 = 1244.41
Current Profit: 6.268 * 43000 - 7800: $261,724

Strategy 1, i.e. buying on the 1st of every month is the clear winner.  

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[hatshepsut93]

But even better strategy is to just put as much as you can on 1st Jan 2015. And I would say it's the same now - better to make a lump sum investment today than to spread it over years and get less coins. It could be also very tempting to try to find the bottom of the bear market, but with such mindset it could be easy to make a worse investment than just buying now. People could easily set some price points for buying, and then they never appear. Like how during the last cycle people waited for Bitcoin to crash to $1,000, and they missed on opportunity to buy it as $3,000-4,000.

[Marvelman]

Strategy 1, i.e. buying on the 1st of every month is the clear winner.  

This is a great comparison, thank you for this. New investors are often unsure which buying strategy to apply. The cryptocurrency market is known for its high volatility, which attracts investors looking for quick profits. DCA is a financial investment strategy that reduces the impact of volatility, and this has again proved to be true here.

[Upgrade00]

I do not think I have seen a post which compares relatively which DCA technique could be more profitable in terms of aount of bitcoins acquired. If DCAing, j personally would prefer it to be as simplistic as possible, this involved buying a specific amount, at a specific time.
Timing red candles or price drops dives into the area of trading and could be complicated for someone who simply wants to own some bitcoins.

But even better strategy is to just put as much as you can on 1st Jan 2015. And I would say it's the same now - better to make a lump sum investment today than to spread it over years and get less coins.

Some would argue that DCA helps someone who doesn't have a lump sum available to build a structured way to stack up their portfolio.
They could for instance set aside 10% of their earnings every week or month to buy Bitcoin.
It also helps with indecisiveness, as some with money to invest would want to pick their best possible time to buy.

[ImThour]

But even better strategy is to just put as much as you can on 1st Jan 2015. And I would say it's the same now - better to make a lump sum investment today than to spread it over years and get less coins. It could be also very tempting to try to find the bottom of the bear market, but with such mindset it could be easy to make a worse investment than just buying now. People could easily set some price points for buying, and then they never appear. Like how during the last cycle people waited for Bitcoin to crash to $1,000, and they missed on opportunity to buy it as $3,000-4,000.

Investing all the amount on a specific date is going to be a terrible idea for beginners.
Imagine they bought BTC near an ATH like 64-65k and it might affect their mental health.
Overall, this post was just to compare two specific DCA strategies.

[Bitcoin_Arena]

Results:

- Strategy 1:
No. of Buyings: 88
Amount Invested: 88x100 = $8800
Amount of BTC Own via Strategy 1: 8.079 BTC
Cost per BTC: 8800/8.079 = 1089.24
Current Profit: 8.079 * 43000 - 8800: $338,597

Not a bad strategy for low income earners who want to own Bitcoin after some years.

Out of curiosity. I used this tool to determine how much would one have worth the amount if they used the whole amount they would have invested in DCA to buy BTC at once on 1st Jan 2015

The results are interesting

[Poker Player]

Strategy 1, i.e. buying on the 1st of every month is the clear winner.  

I would say the clear winner is because of the ease of investment style and not so much because of the profitability, since in one case it is $29 per dollar invested and in the other $26.

I have seen similar analyses regarding the stock market and the result is similar, doing DCA every month is approximately as profitable as investing in the low points of the market, but one strategy is extremely easy and in the other you have to know how to get it right, which is something that even experts often fail to get.

[franky1]

people get paid every month. they can deposit funds into an exchange anytime they please.
by trying to get everyone to buy bitcoin on the first of the month you are causing a PUMP on the first of the month which results in those buying, ending up paying more for less coin.. yep the whole idea of DCA is to tempt people into blindly buying at whatever price every month so that those that want to exit can have a higher price to sell at. on a predictive day,

in short. those advising you to blindly buy on 1st of month, are people that want to sell on a high on that day. its in their interest to fool people into buying on this day. its not in your interest to buy on this day

a better idea, yes deposit at the start of the month(or anytime of the month) and if your willing to buy at any price like suggested by the DCA's.. dont. instead be ok to look at the charts to see if that day is a high for the week/month and wait out for a dip/correction and then buy.

even if you wait out for just a 1%-5% dip. it benefits you.. your 1%-5% better off right from the start

buy the dip not the high

this 'buy the dip'(red candle) strategy helps you, because you are not just buying at the monthly high.. but actually helps the community in general, as well as maximising your own profit.

if everyone buys the dips, the dips level out and so the price stabilises and doesnt drop as heavily (less volatility on the ups and the downs)

the silly 'everyone buy on date X' causes a fake pump on a specific day. and then a correction which saddens everyone.
EG if you buy on the first, you are buying into a high, and when it corrects on the 2nd-3rd of the month your pee'd off that you missed an opportunity to maximise your buy. thus you feel you already lost out on 1%-5% opportunity

so for you own benefit buy the dip(red candle).
this would also as just said level out the pump and dump volatility and help keep a nice smooth line of slower stable increases rather than pump and dump speculative sentiment where more often than not, people do lose out

..
oh and strategy 2 is better.. the only reason the topic creator presents it as bad is because he shows lower amount of buys, and has mesed around with fake prices per buy to make it seem less profitable.
thus make the $$profits look less than strategy 1.. even though the profit per coin in strategy 2 is better.. it shows as less overall profit because he buys less coin over the 7 years, and he also faked the numbers of how much those coins were worth at the start...
yes buying a red = more coin even though he falsely presents it as less coin

emphasis
yep if you are buying red candles..(2) your buying the dip meaning your going to get more coin per $ then (1) .. the topic creator has faked the numbers to make it look like you are going to get less..
he wants dumb people to buy in on a pump.. on a specific day so that he can see pumps happen on the first so he can profit by selling on the pump(first of the month)

here is an example of actual buys of $100 each month.. just on the first 4 months of 2015 as an example i done 2 strategies..
first of month. and first dip(red) below 1st of month price
Timestamp   price            first of month   first dip
01 Jan 2015   314.81         0.31765192   
04 Jan 2015   263.17                              0.37998252
               
01 Feb 2015   227.53         0.43950248   
06 Feb 2015   222.36                              0.44972117
            
01 Mar 2015   275.87         0.36248958   
05 Mar 2015   273.11                              0.36615283
               
01 Apr 2015   246.49         0.40569597   
11 Apr 2015   236.00                              0.42372881
                  totals            1.52533995   1.61958534
                  % diff                                    106.1786482%

[Rikafip]

yep the whole idea of DCA is to tempt people into blindly buying at whatever price every month so that those that want to exit can have a higher price to sell at. on a predictive day,

Nah, the whole idea of DCA to making investing in something that you believe in the long run as simple as possible, I don't think that there is some conspiracy going on. After all no one is putting gun to your head to buy at 1st of each month, that date is just used as an example.

a better idea, yes deposit at the start of the month(or anytime of the month) and if your willing to buy at any price like suggested by the DCA's.. dont. instead be ok to look at the charts to see if that day is a high for the week/month and wait out for a dip/correction and then buy.

Easier said than done, especially for someone who is not good at trading or doesn't want to spend time looking at charts and timing the market. I tried that in the past but since I suck at trading I rather opted for DCA. Experienced trader could surely end up with more BTC but I honestly don't care whether I am buying BTC at 40k or 43k since I am not buying it with the intention to sell anytime soon.

[franky1]

its not about taking time and hoping to find the bottom..
my examples of the 4 months are not even the lows of each month.. no one can predict or buy right at the exact moment of a low predictively.. ..
(that said if they could they could maximise 17% profit instead of 6%)
my demonstration is just the very first dip below the first of the month. not the low not the biggest dip. just the first dip below the first of the month. which can be done easily

plus your still getting the monthly investments for long term, but with the added bonus of not buying into a hype pump that would be caused by so many people buying on the first(something the topic creator wants to cause)

yep if everyone bought on the first of the month... that first of the month becomes the high of the month, the most expensive and worse time to buy

..
you do not need to be a financial analyst to read charts. its simply looking at mountains and valleys

                                                                                                                               /\
                                                                                                                               | |
if the lasts 2weeks (end of previous month) were /\/\/\  and then first of the month was| |
and then the 2nd-14th of the month was /\/\/\/\ again


EG
        /\
        | |
/\/\/\| |/\/\/\
14    01       14
  jan      feb

even you can see that 01 of feb is a bad time to buy, where anytime of the rest of the month is better

i am not talking about finding the ultimate low of the month. im just saying look for a 1-5% dip from the peak if they first of the month is the high..(yep again emphasising that if idiots follow this subtle pump date. the 1st will become the monthly high)