Since Bitcoin (Bitcoin) Was sold on April 19, an indecisive market like this might Test the patience and perseverance of even the most dedicated traders and analysts, Especially when the constant bottom call meets lower lows.
Although periods of low trading volume and price fluctuations may be perfect conditions Whale-sized trader, Ordinary investors have no chance, especially now that millions of dollars of funds are beginning to participate.
The data shows that for retail investors who want to build long-term profits in the traditional and encrypted markets, the dollar cost averaging method (DCA) is not the best method for day trading and trying to grasp the bottom of the market.
In 2020, Coin Metrics pointed out that since the peak in December 2017, the average number of investors whose dollar costs entered BTC was Still profitable after three years.
Coin Metrics wrote on Twitter:
“Although the transaction price of #Bitcoin is still 30% lower than ATH, starting from the peak of the market in December 2017, the average return on dollar costs will reach 61.8%, or 20.1% per year. Similarly, for #Ethereum (still higher than the peak 71%), the average dollar cost from January 2018 will return 87.6%, or 27.9% per year.”
Although the graph is now a bit outdated, it can be seen that, in the long run, continued diversification of investment over time has led to an overall increase in the value of the portfolio.
Currently, as BTC has fallen more than 47% from its historical high of $64,863, and the cryptocurrency market continues to send mixed signals, now may be a good time to deploy a DCA strategy.
Investment is not just “buy on dips”
Let’s take a look at the results of the USD cost averaging of multiple cryptocurrencies from 2017 to 2018 to the end of June 2021.
The starting point for each analysis will be the day when the token has the highest value in the history of the 2017-2018 bull market, and from then on, a weekly investment of $10 will be applied.
This Bitcoin’s peak According to data from CoinMarketCap, this cycle occurred on December 15, 2017, when the trading price of BTC was $19,497.
Using the DCA estimation tool provided by CostAVG.com, you can see that if you invest $10 in BTC every day from December 15, 2017 to June 30, 2021, the total investment of $1,850 will increase by 306% and the value will be $7,519 .
If you want to ask the opinions of most fund managers or traders who make a living in the traditional investment field, a 306% increase in portfolio value over a four-year period is an amazing rate of return.
Ether brings excess returns
The price of ether (EthereumWith the rise of decentralized finance (DeFi) and non-fungible tokens (NFT), the use of the Ethereum smart contract blockchain has grown exponentially and boosted the demand for ETH, so from the end of 2020 to the beginning of 2021 Explosive growth.
Increased demand helped ignite the rebound The price of Ether on May 12, 2021 is USD 4,363, But at the time of writing, its price has fallen by nearly 50% and the transaction price is less than $2,200.
During the 2017 bull market, the price of ETH reached a record high of $1,396 on January 12, 2018. Investors using the DCA strategy, starting from the peak, invest $10 per month, spending a total of $1,810 and generating a portfolio value of $15,507 based on the current price of Ether. This represents an increase of 757%.
The percentage gain of Ether is more than twice that of Bitcoin, which gives those who believe that Ether has become a better investment in the past few years have a certain degree of credibility.
Small-cap altcoins also benefit from the DCA strategy
In order to demonstrate the benefits of applying the DCA strategy to small-cap altcoins, let us quickly analyze Theta, which is one of the breakthrough stars in 2021.
THETA started a parabolic price climb in December 2020, and by January 1, 2021, its price rose from approximately US$0.80 to US$2.40. Then it soared to a record high of $14.28 on April 15.
According to the data provided by Blockchaincenter.net, the average dollar cost of various tokens is provided with a fixed investment of 10 US dollars per day. If investors start investing in THETA on January 1, 2018, the current cumulative investment is 12,480 US dollars worth more than $638,000-an increase of 5,000%.
Although it is obvious that not all altcoins performed as well as THETA during that time period, this is a good example of how stable investment in small-cap stock projects can reward patient investors.
The benefit of the average dollar cost is that it eliminates the emotions in the investment process, allowing investors to focus on other things, while day traders spend hours behind the screen and often bear more losses than gains.
This also eliminates the need to find market tops and bottoms, and allows investors to gain exposure to various assets in a measurable and consistent manner.
No technology is perfect, and not every crypto project will reap considerable benefits and can even survive the next bull market cycle, but the average dollar cost is a way to provide consistent results for amateur and professional investors
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The quotes in this newsletter are taken from previously published sources and have been slightly edited.
The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.