Cryptocurrency News

Smart investors don’t just buy dips, they do dollar-cost averaging.


Choppy markets have defined the crypto space since bitcoin (B T c) sold out on April 19, and such uncertain markets can Test the patience and fortitude of the most dedicated traders and analysts, especially when frequent calls for bottoms are combined with lower lows.

While low trading volume and whipsaw price movements may be the right conditions for the period Whale shaped merchant to playThe average investor has no chance, especially with multimillion-dollar funds now in action.

Data shows that dollar-cost averaging (DCA) is the best way for retail investors to make long-term profits in the traditional and crypto markets, rather than day trading and attempting market bottoms.

In 2020, Coin Metrics reported that the average dollar cost investors were in BTC starting from the December 2017 peak Still in profit after three years.

Coin Metrics tweeted:

“With bitcoin still trading 30% below ATH, the dollar would have returned 61.8%, or 20.1% year over year, from the market peak in December 2017. Similarly #Ethereum (still down 71% from its peak) ), the dollar cost average would return 87.6%, or 27.9% annually, from January 2018.

Graph showing positive BTC returns from dollar-cost averaging. Source: coin metrics

While the graph is a bit out of date now, one can see that over the long term, consistent investments over time have resulted in an overall increase in portfolio value.

Currently, as BTC is down more than 47% from its all-time high of $64,863 and the cryptocurrency market continues to send mixed signals, this could be an opportune moment to implement the DCA strategy.

There’s More To Investing Than “Buying Dips”

Let’s take a look at the results of dollar-cost averaging across several cryptocurrencies from 2017-2018 to the end of June 2021.

The starting point for each analysis will be the day of the coin’s all-time high price in the 2017-2018 bull market, and a weekly investment of $10 will be implemented from that point onwards.

peak for bitcoin According to data from CoinMarketCap, the turn of the cycle came on December 15, 2017, when BTC was trading at $19,497.

Using the DCA estimation tool provided by CostAVG.com, one can see that if $10 were invested in BTC on a daily basis from December 15, 2017 to June 30, 2021, a total investment of $1,850 An increase of 306% was observed. Price to be worth $7,519.

Bitcoin dollar-cost averaging portfolio over time. Source: CostAVG.com

If one asks the opinion of most fund managers or traders who make a living in the traditional investing world, a 306% increase in portfolio value over a four-year period is a fantastic rate of return.

Ether Begins Mass Comeback

Ether price (ETHThe rise of decentralized finance (DeFi) and non-fungible tokens (NFTs) from late 2020 to early 2021 led to a rapid increase in the use of the Ethereum smart contract blockchain and fueled demand for ETH.

The increased demand helped ignite a rally that sent Ether will be priced at $4,363 on May 12, 2021, but at the time of writing its price is down by almost 50% below $2,200.

During the 2017 bull run, the price of ETH reached an all-time high of $1,396 on January 12, 2018. Investors using the DCA strategy would have spent and generated a total of $1,810, investing $10 per month at the peak. Portfolio value of $15,507 at the current price of Ether. This shows an increase of 757%.

related: Ethereum 2.0 approaches 6 million staked ETH milestone

Ether dollar-cost averaging portfolio over time. Source: CostAVG.com

The percentage gain for ether is more than twice that for bitcoin, which gives some credence to those who have argued that ether has been a better investment over the years.