An analysis recommends implementing a dollar cost averaging (DCA) strategy of $10 per day or around $300 per month during both bear and bull market cycles. The most recent crypto bear market started in January 2018 and ended in September 2020, and a DCA investment of $10 per day during this period would have resulted in total investment of $10,040. In contrast, investing $10 per day during the current bull market (which began in October 2020) would result in a total investment of approximately $5,730. The analysis uses price data to calculate the total amount of each cryptocurrency that $10 would have bought during each cycle.
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Historical Price Data: A Comparison of Dollar Cost Averaging in Bull and Bear Cycles
Investing in cryptocurrencies can be a rollercoaster ride of ups and downs. By examining historical price data, we can gain insights into how investing during bull and bear markets could impact your returns. In this article, we will compare the results of implementing a dollar cost averaging (DCA) strategy of $10 per day during the most recent crypto bear and bull cycles.
Bear Market: January 2018 – September 2020
The last crypto bear market started in January of 2018 and lasted until around September of 2020. Investing $10 in crypto per day during this time period would have resulted in a total investment of about $10,040. Using the price data, we can calculate the total amount of each crypto that a $10 investment would have gotten you at its specific price on that particular day.
Bull Market: October 2020 – Present
The current bull market started around October 2020. Investing $10 in crypto per day during this time period would have resulted in a total investment of about $5,730. Using the price data, we can calculate the total amount of each crypto that a $10 investment would have gotten you at its specific price on that particular day.
Comparing Results: Bear vs. Bull
Comparing the results of our DCA strategy in both the bear and bull cycles, we can see that investing during the bear market would have given us more cryptocurrency for our money. However, if we look at the current price values of those cryptocurrencies, we can see that our investment during the bear market is worth significantly less than our investment during the bull market.
It is important to note that this comparison only looks at one strategy and does not take into account other investment options, such as lump sum investments or actively managed portfolios. Additionally, past performance is not indicative of future results, and cryptocurrency markets are notoriously volatile and unpredictable.
In conclusion, dollar cost averaging can help mitigate some of the risks associated with investing in cryptocurrencies. By spreading out a fixed amount of investments over time, investors can potentially limit the impact of market fluctuations. However, as with any investment strategy, it is important to do your research, understand the risks, and make informed decisions.
