Bitcoin (BTC) dollar cost averaging for even a single year is an opportunity investors “cannot ignore,” one of the industry’s best-known price analysts thinks.
In a Twitter debate on June 3, PlanB, creator of the popular stock-to-flow Bitcoin price models, said that short-term dollar cost averaging (DCA) could easily net 70% returns.
“Investors cannot ignore this”
His example revolved around a three-year process. Slowly increasing investment on a sliding scale through 2017, waiting all of 2018, then applying the opposite process through 2019 would have yielded returns of 70%.
“IMO investors cannot ignore this,” he summarized.
Asked whether it mattered at what point an investor started the process, PlanB said that Bitcoin’s overall historical profitability meant that the odds hardly decreased.
“It doesn't really matter much because the (historical) odds are 9 to 1 that you earn a positive return,” he added.
Bitcoin DCA investment returns chart. Source: PlanB/ Twitter
Square leads DCA rush
DCA refers to buying small amounts of an asset over time. The goal of such an investment strategy is to avoid exposure to market swings, a conspicuous phenomenon in Bitcoin. March was the most volatile month for BTC price since January 2014, one monitoring resource suggests.
Signs that investors know that they cannot ignore the idea are already present in the wider Bitcoin industry this year.
Last month, Cointelegraph reported on payments company Square releasing DCA Bitcoin buys to users. At the time, figures from dedicated calculating resource dcaBTC suggested that a $10 weekly buying for the past three years would have netted 65% returns.
Alternative timeframes provide similarly attractive results. Quarterly returns for Bitcoin in Q2 alone have topped 50%, easily outstripping gold’s 7.2% and the S&P 500’s 20.8%.
Year-to-date, Bitcoin’s 34% returns make it the best-performing macro asset.
Macro asset 2020 returns comparison. Source: Skew
Despite this, overall investment volumes remain tiny compared to established asset classes, with a report this week nonetheless arguing that if the current growth rate continues, Bitcoin will soon challenge the competition.