Why it's so hard to outperform simply dollar cost averaging Bitcoin
489 sats \ 6 comments \ @031d5cc65e 22 Sep 2023 bitcoin
Newbie to stacker news here. I've been stacking sats for just over 3 years. Just bitcoin - not lost any of it, never owned any alts, but nonetheless, it's been a long bear market!
It struck me the other day that despite DCA-ing consistently, I have still managed to underperform the 3 year moving average Bitcoin price. This is due to making some lump sum buys in 2021 and 2022. These weren't even necessarily at the height of the bull market - mainly at low to mid 40s, mid 30s, but still at prices that sit above the 3 year average now.
Now I get that everyone is going to make the odd lump sum buy vs DCA - and that's fine. But let's take an example where you solely have a consistent weekly income stream available to cost average - this is why I think it's so hard to outperform it.
The crux is you're then looking for a period where bitcoin is "expensive", and are going to save some of your weekly buys until a point where bitcoin is "cheap". You then need a way of ascertaining this.
Let's say you try a simple rule - save up when the mayer multiple is over 1.5, and spend this later when it's under 1. (The mayer multiple is the price of bitcoin divided by its 200 day moving average). This would have produced plenty of good feeling results over the years. There are obviously thousands more variations of example - but they all suffer the same issue.
Here's the problem. With that money on the sideline, you're short Bitcoin in that respect, and even when the indicator comes, you don't know how long it will be there for or how much lower it will go. All of these systems will be a bit like making lots of odds on bets - you might win most of them, but they'll be the odd time when you get absolutely creamed. In my example above that method would have stopped you buying bitcoin at some point of the autumn in 2020 (say 16k), but then encourage you back in at 40k the following summer of 2021.
In this example trying to outperform a regular DCA, the moment you keep some of that money on the sidelines you're short Bitcoin. Don't be short Bitcoin.
Let me know your thoughts!
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121 sats \ 2 replies \ @DarthCoin 22 Sep 2023
I have still managed to underperform the 3 year moving average Bitcoin price.
Your mind is still not prepared for Bitcoin. That's 100% sure! Your mind is still trapped into fiat mindset, is always comparing your BTC stash with how much could be in fiat. That is totally wrong. STOP looking at the price. Is a distraction.
STOP buying it as "investment". EARN it as money, in exchange for your hard work.
Bitcoin is ENERGY stored in the most secured and brilliant way.
What people do every day, every minute? People are always in a continuous run for gathering energy, in many different forms: to eat, to store, to trade, to use it as money, to use it as savings. People depend 100% of energy. People are spending also large amounts of resources just for STORING energy.
And then Bitcoin comes and fix all of these problems: Bitcoin is pure storage for energy, secured by mathematical algorithms, something that will be eternal. If you own Bitcoin YOU OWN ENERGY FOR THE REST OF YOUR LIFE.
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1 sat \ 1 reply \ @stacker6102 22 Sep 2023 freebie
Harsh, but fair! You're right of course. I don't obsess over price to be honest, but even if I live my life on a bitcoin standard, earn bitcoin for my hard work and denominate everything in sats, the volatility of them is wild in terms of purchasing power of everything else - and naturally screws with your head. Thinking long term, how many sats do I need for a safe retirement - for Lionel Schriver's fabled regular chicken and a bottle of wine?
10 sats \ 0 replies \ @DarthCoin 22 Sep 2023
If you really love to DCA try also to read the "Operation Saylor" series of posts from @pillar Are offering more insight about these kind of things: https://stacker.news/pillar/posts
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0 sats \ 0 replies \ @legxxi 22 Sep 2023
I like this website for checking how good DCA is in the long run:
https://er-bybitcoin.com/
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0 sats \ 0 replies \ @0232cf2253 22 Sep 2023
3 years is too low. IMO you should align your thinking with the 4 year halving cycle + the occasional year or two because I doubt this is that exact. Always leave wiggle room in your expectations.
DCA VS lump sum makes no difference. I have done both. Do what you can afford to do. I suggest DCA for most because it allows you to put 50 dollars into an account every month and have it just auto DCA. All you have to do is make sure the cash balance stays good. This keeps your finances flush with cash as opposed to if you lump sum and then need that cash for something unaccounted for a week or two later. Don't stress your finances when you don't need to.
I don't know anything about the math and stuff. That is going way too deep.
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