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.
While the graph is a bit out of date now, one can see that over the long term, consistent investments over time have resulted in an overall increase in portfolio value.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.
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%.
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.
Small-cap altcoins also benefit from DCA strategy
To show the benefits of applying the DCA strategy to small-cap altcoins, let’s take a quick analysis of Theta, which has been one of the breakout stars of 2021.
Theta began a parabolic price climb in December 2020, increasing its price from around $0.80 to $2.40 by January 1, 2021. It then reached an all-time high of $14.28 on April 15.
According to Blockchaincenter.net, which provides data for the average dollar-cost of a variety of tokens at a set investment of $10 per day, if an investor starts investing in THETA on January 1, 2018. Now the cumulative investment of $12,480 would be worth over $638,000 – an increase of 5,000%.
While it is clear that not all altcoins performed as well as THETA during that time period, it is a good example of how stable investing in a small-cap project can reward patient investors.
The advantage of dollar-cost averaging is that it removes emotion from the investing process and allows the investor to focus on other things, whereas day traders spend hours behind the screen and often make more losses than gains. .
It also removes the need to search for market tops and bottoms and allows investors to get exposure to a variety of assets in a measured, consistent manner.
No technology is perfect, and not every crypto project will make substantial profits or even survive until the next bull market cycle, but dollar-cost averaging is an approach that is great for amateur and expert investors alike. provides results.
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Quotations in this newsletter have been lightly edited from previously published sources.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.