Unpopular opinion: DCAing during a bull run isn’t necessarily good advice

Cryptocurrency News and Public Mining Pools

Unpopular opinion: DCAing during a bull run isn’t necessarily good advice

It feels like we’re missing out on genuinely dissenting comment in the midst of the frenzied optimism of the top of a bull run.

This is focused on those new to crypto, or who haven’t been accumulating for years / pre bull run. In other words, those of us who got in late to being early.

Dollar Cost Averaging is always, always mentioned as the best strategy, together with HODL. Why? Because timing the market is difficult. You have to be right when you sell (i.e. at or near the top), and you have to be right again when you buy back in (i.e for the best possible price). It’s understandable that many people prefer to avoid doing this entirely, and just put money into the market regularly.

My point of discussion is around bull runs. Specifically, when we’re well into one. The kind of time we’re in now: everything is pumping, no one thinks it’ll end, and even the permabears are starting to wonder it a bear market is actually coming, and maybe this time is different.

If you’ve been HODLing and accumulating crypto for years, DCA is probably a good strategy. If you’re not playing with loose change, you’ve probably built up some decent stacks – even if you’d like them to be bigger. Why fix what isn’t broken, right?

If you’re new to crypto, don’t have much to put into the market, or have very small amounts of crypto; the risk calculation in the current climate might just be a bit different.

Your downside risk is potentially higher. Everything that was once an all time high is now way past that, so this isn’t to say I think the music is about to stop on cryptos meteoric rise over time. The point is that, even with returns remaining equivalent whatever you’re putting in (eg if 1 BTC goes up ten times in value and you’ve only got 0.01 BTC, you’re still 10x up), your risk is higher at current valuations.

By way of a loose example. If you have £4,000 to put into crypto and have decided (for the sake of argument) BTC is what you want to hold, you’re now the proud owner of 0.1 BTC. Nice. It all depends on your goals and risk tolerance, but let’s say BTC then rockets to £100,000. Nice. That £4,000 is now £10,000. That’s a nice return. Obviously, you can be very optimistic about price targets and potential returns, and no one knows where it could end up.

However, if you’re unconvinced that the project in question will continue rocketing up indefinitely, or question just how high it could realistically go, putting that £4,000 in for 0.1 BTC is exposing you to downside risk. If we enter a bear market, it could be years until that 0.1 BTC returns to being worth £4,000. Perhaps even more galling, if the price of 1 BTC drops at a similar level to previous bear markets, that £4,000 might have got you 1 (or nearly 1) BTC during the bear.

No one knows when the market will drop, how high any project will be when it drops, or by what percentage it’ll drop, so there’s potential opportunity cost here too. By not buying that 0.1 BTC at £4,000, you might find that £4,000 instead would now buy you 0.05 BTC. The point I’m trying to drive at here is, as much as we see a market divorced from any sense of fundamentals with the current market cap of projects like DOGE as they are, you need to ensure you’re grounding your investments in your thesis on what’s realistic. If you approach that with too heavy a drag on the hopium rag, you could end up risking relatively (for you) large amounts of capital, for a lower upside, when actually you might have been better trying to time the market, and risk opportunity cost, by aiming to buy following any correction

submitted by /u/BuffettsBrokeBro
[link] [comments]