Smart investors don’t just buy dips, they cost an average of dollars

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Choppy markets have defined crypto space since Bitcoin (BTC) made its 19th lows.

While the times of low volume and whip price movement can be the perfect conditions for whale-sized traders, the average investor stands no chance, especially when million dollar funds are now starting to get into the action.

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The data shows that dollar cost averaging (DCA) is the best practice for retail investors looking to make long-term profits in both traditional and crypto markets rather than day trading and trying to pinpoint the bottom of the market.

In 2020, Coin Metrics pointed out that investors whose dollar cost was averaged in BTC from the December 2017 peak were still making a profit three years later.

Coin Metrics tweeted:

“Although #Bitcoin is still trading 30% below ATHs, the dollar cost would have brought the dollar cost back on average from the market high in December 2017, 61.8%, or 20.1% annually. Similarly, for #Ethereum (still 71% below its peak) the dollar cost would have come back on average from January 2018 at 87.6%, or 27.9% annually. “

Graphic to illustrate positive BTC returns from the dollar cost mean Source: Coin codes

While the graph is now a little dated, it can be seen that, over the long term, consistent investments spread over time have resulted in an overall increase in the value of the portfolio.

With BTC currently down more than 47% from its all-time high of $ 64,863 and the cryptocurrency market continuing to send mixed signals, it could be an opportune moment to embark on the DCA strategy.

Investing is more than just “buying the dip”

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

The starting point for any analysis is the day of the token’s 2017-2018 bull market all-time high, and from that point onwards, weekly investments of $ 10 will be made.

The peak for Bitcoin during the cycle came on December 15, 2017, when BTC traded for $ 19,497, according to data from CoinMarketCap.

Using CostAVG.com’s DCA estimation tool, it can be seen that if $ 10 was invested in BTC every day from December 15, 2017 through June 30, 2021, the total investment would have increased 306% from $ 1,850 in value is said to be worth $ 7,519.

Bitcoin dollar costs average portfolio over time. Source: CostAVG.com

If you ask the opinion of most fund managers or traders who make a living in the traditional investment world, a 306% increase in portfolio value over four years is a spectacular return.

Ether strikes back an oversized return

The price of Ether (ETH) skyrocketed from late 2020 to early 2021 when the rise in decentralized funding (DeFi) and non-fungible tokens (NFT) exponentially increased usage of Ethereum’s smart contract blockchain and increased demand for ETH .

The increased demand helped spark a rally that drove the price of Ether to $ 4,363 on May 12, 2021, but the price has fallen nearly 50% since then and is below $ 2,200 at the time of writing.

During the 2017 bull market, the ETH price hit an all-time high of USD 1,396 on January 12, 2018. Investors who followed the DCA strategy and invested $ 10 per month from the high would have spent a total of $ 1,810 and generated a portfolio value of $ 15,507 at the current price of ether. This corresponds to an increase of 757%.

Connected: Ethereum 2.0 is approaching 6 million ETH milestone

Average portfolio with ether dollar costs over time. Source: CostAVG.com

The percentage gain for Ether is more than double that of Bitcoin, which gives some credibility to those who have argued that Ether has been a better investment in recent years.