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- According to data by Coin Metrics investors who dollar-cost averaged into BTC from December 2017 were still in profit after three years in 2020.
- The DCA strategy is also viable for altcoins with relatively smaller market capitalization.
- Dollar cost averaging strategy eliminates sentiments from the investment procedures enabling them to focus on bigger things.
The crypto market may not be as lively as it was back three months ago but sticking to the dollar-cost averaging strategy may still be the best investing strategy out there. Cryptocurrencies have fallen down from their all-time highs but there is still scope for long-term returns. Times like these do test the dedication of investors and in addition constant calls for a bottom are met with lower lows. Bitcoin has lost almost 40% of its value ever since it reached its all time high of $63,000 in April. On June 22, BTC plummeted down to $29,458.35, the lowest it has been in the past three months. Bitcoin tried to hold its position above the $35000 mark but again on June 26 it fell down to $30,405.
DCA is a Much Better Strategy than Day Trading
According to analysts, dollar-cost averaging (DCA) may be the best method out there for investors. Rather than day trading or attempting to sync with the market bottom, DCA will be a much better option. According to data by Coin Metrics investors who dollar-cost averaged into BTC from December 2017 were still in profit after three years in 2020. Coin Metric tweeted that despite bitcoin still trading 30% below all-time highs, dollar cost averaging from the peak of the market in Dec 2017 would have returned 61.8%, or 20.1% annually. With steady investment spread over the years, the portfolio would see an increase.
Applying DCA Strategy for ETH and BTC Would Have Resulted in 757% and 306% Gain
Now, when bitcoin’s performance is in turmoil, may be the optimal time for the investors to utilize the DCA strategy. Ethereum saw an all-time high of $1,396 in January, 2018. Investors who cleverly invested $10 every month during the bull run, would have invested a total of $1,810 and would result in a portfolio value of $15,507 which signifies a return rate of 757%. While for BTC, investors putting $10 every month during the token’s peak would have invested a total of $1,850 would have seen a 306% increase amounting to $7,519.
However, major cryptocurrencies like Ethereum or Bitcoin are the only ones benefiting from the DCA strategy. The DCA strategy is also viable for altcoins with relatively smaller market capitalization. For instance, if an investor spends $10 every month on THETA the total investment would have been valued to $12,480 would now be worth more than $638,000. This signifies an increase of 5000% in the portfolio. Dollar cost averaging strategy eliminates sentiments from the investment procedures enabling them to focus on bigger things. Whereas day traders often incur more losses even though they spend hours before the screen.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
