Great article that should be read by anybody who wants to buy some bitcoin or other crypto currencies. The main take away is to use the DCA method to take advantage of the volatility in the market. I have been buying bitcoins since the start of the year myself, and its so much better to spread out your purchases across multiple months instead of buying everything at once. Who would have thought in January that bitcoins are going to drop down to 17,000 USD. The timing issue is one the biggest challenges in trading and with DCA we need to worry less about buying at the right price. Also DCA is well used strategy in stock trading for years.
Your example is the proof that sometimes DCA backfires when there’s clear bearish market trend while you keep buying for more. The price obviously hit the peak on 67K and the bullish is already ended the moment the price touch below 50% of the ATH. There’s a perfect time to apply DCA if you want to use it properly instead of randomly use it on a clear start of bearish trend for long term.
You are mixing up ideas, AbuBhakar. DCA is not the same as buying on dip. They have different underlying goals and objectives, and sure anyone is going to prefer to buy when the price is down, but DCA presumes that the buyer does not know which direction that they BTC price is going to go so there is a preference to get in at any price and to begin to buy and to tailor such buys to the buyers budget and to consider that the investment timeline is relatively long so that in the longer term the buys have good chances to be profitable down the road.
The mere fact that the BTC price went down does not mean that the DCA plan backfired because another goal of DCA is getting the fuck started rather than sitting on one's hands trying to figure out how much dip is enough of a dip and all of that baloney. Sure, maybe you know when there is going to be a dip, or maybe after the price had moved down, then you can assert that the person bought too high.. but you are likely ONLY correct because you are looking at the BTC price afterwards, and at an earlier tiime you did not know if the BTC price was going to go up or go down..
I believe you lose a lot even if you do DCA if you keep buying since January until now. DCA is perfect if there’s already a sign of recovery in the longer time frame because you can guarantee that the price will be moving upward in long term.
That's not how DCA works. DCA is not about trying to time the BTC price in the market, and so if you are trying to suggest that DCA is timing BTC price moves then you are looking at some other kinds of ideas, such as buying the dip or lump sum investing, and sure lump sum investing and buying the dip can complement DCA and they likely even attempt to account for timing of the BTC price but a pure DCA strategy would not be engaged in such price analysis. The main analysis that anyone does in DCA investing is to assess the underlying asset (BTC in this case) in such a way to have a decently high level of confidence that the price of the underlying asset (BTC) has decent chances of being up in the longer term, and another thing that a DCA buyer would assess is his/her budget in such a way in order to figure out how much that they are able to DCA buy on a regular basis in order to determine the quantity to buy and the increments in which to buy, and they also might attempt to assess their target BTC accumulation levels including how long they would like to shoot for in order to achieve their BTC accumulation targets and whether they want to approach their investment into BTC through aggressive amounts of injection of value or more whimpy injections of value, and of course they can assess the trade offs to each and they can adjust their approach at anytime including considering whether they want to supplement their DCA strategies with buying on dips and/or lump sum investing (or timing the market like you suggest.. but those would be supplemental approaches to DCA rather than the exercise of a more pure DCA strategy that does not need to employ the timing of purchases.. but instead to purchase relatively regularly.
1: Use Dollar Cost Averaging (DCA) Technique:
In Bitcoin accumulation, this is very important.
In the DCA way of buying Bitcoin, you can minimize your possible loss because you only purchase Bitcoin when it will drop. Buying a little by little using this method, will surely your investment becomes profitable when there's a new ATH.
All in all, OP has good input, and newbies should know this and educate themselves when it comes to accumulating Bitcoin.
It's a complete process of accumulating Bitcoin.
Not only for bitcoin, but also in all established coins in the crypto market, DCA is still very applicable.
DCA does not necessarily apply for shitcoins.. because you first need to assess that they asset that you are investing in has decent chances to have higher prices down the road in terms of whatever happens to be your investment timeline, such as 4-10 years or further down the road.. and if you are being honest in your assessment of whatever shitcoin you are looking at, the overwhelming majority of shitcoins are going to fail in that kind of longer term value assessment.
Sure, you can buy and sell shitcoins and attempt to increase the size of your investment portfolio, but getting involved in shitcoins is more likely a question of timing your investments rather than employing DCA in an intellectual honest way. In other words, generally speaking fuck shitcoins... and get into them at your own peril if you like gambling and if you believe that you can time your in and outs.
By the way.. you are trying to assert that if the shitcoin is "established" then that would be enough to employ DCA with that coin, and it seems to me that you are deluded if you believe that a mere assessment that it is "established" is going to be enough to cause such coin to have value that makes it worthy to justify employing a DCA approach with it.
But since bitcoin is the most highly volatile one, then using DCA in accumulating bitcoin will surely work so far.
Mere volatility does not rule out having a DCA approach, and actually volatility give a decent amount of justification towards the employment of DCA as a BTC accumulation strategy.... and again amongst the most important of assessments would be for the BTC accumulator to determine that they believe that BTC's price trajectory is generally upwardly inclined and not likely to go to zero or to be downwardly declining... Therefore when the BTC price goes down, there is a presumption that it's price is going to return up at some point. Generally speaking, the same presumption of an upward price trajectory is not possible to do with the overwhelming majority of shitcoins, including the "established" ones.. so if you do conclude that any of the shitcoins do likely have an upward price trajectory, then you could DCA invest into them.
By the way, there are a large number of shitcoins that almost totally rely on the upward price trajectory of bitcoin as a presumption that they will still be able to survive and to have an upward price trajectory in the long term, and it seems to me that having reliance on BTC's upward price trajectory at their investment thesis should NOT be enough to justify investing in them or even presuming that they are going to have an upward price trajectory merely because they rely upon bitcoin's ongoing upward price trajectory.. so in that regard, there remains justification to get into BTC and/or to DCA invest into BTC based on BTC's asymmetric upward price trajectory.
I have been DCAing since the start of the bearish market, and it definitely helps me not to be worried with small price drops. And the fact that I’m into bitcoin for long term investment, that motivates me to never be affected with temporary price decline.
Well at least you are thinking about bitcoin and not totally distracted into thinking about shitcoins.
3: Do not freak out:
One of the biggest benefit of long term investment is you don’t have to check market again and again. Thus you will face no tension. But to do that you have to build patience in yourself. Which you can do by not becoming a prey of FOMO (Fear of Missing Out).
FOMO, freaking out, panicking, these are the feelings that will never be gone to anyone. An old-time investor or a newbie will have to feel this from time to time.
Even if you're confident with the market, it's true that this feeling won't be gone. It will be there for a few minutes then it's gone again. Also me, still feels it but I'm not letting myself to manifest it and do panic selling.
It does seem that the longer that you have been into bitcoin and the more that you have tried to engage in reasonable and prudent BTC accumulation strategies, then the more likely you will not freak out in any of the ways that you mentioned..
It can take a while to build your BTC accumulation position, so the psychological breaking points of various people are going to vary, and each person does need to attempt to find a kind of BTC accumulation approach that help to bring some level of balance to their psychology, even when there are large BTC price moves that go beyond expectations.. which we know does seem to happen fairly regularly in BTC, and you are correct that even longer-term investors into BTC might get nervous about some of the extremes in the BTC price movements.
important point in my opinion for beginners don't panic easily and buy bitcoin when the market is down.
I honestly don't think we should encourage the inexperienced to only buy when the market is on the downtrend as one can necessarily tell when it would always occur but rather buy when you got the money you can spare. Either buying at 60k or 20k, believe me, in the long run, there will be no such thing as regret.
You are describing dollar cost averaging, which is to buy at whatever price, within parameters that are hopefully somewhat personally tailored to the person who is employing such DCA strategies.
