You Need A Smarter Dollar-Cost Averaging Strategy

A Great Strategy

Dollar-cost averaging has been proven to be one of the best and safest strategies for long-term investors. Over time the diligent investor sees returns. Diligence requires a consistent investment strategy. Investors who invest on a weekly or monthly basis generally perform really well over the long run. However, this is a strategy that has its roots in traditional markets. You generally don’t see drops of 95% in traditional markets. Up until very recently, traditional stocks generally didn’t experience the volatility they are currently experiencing. They too may have to revise their approach. Dollar-cost averaging is a great approach for a bull market, or even a sideways market.

There Are Better Ways

I remember taking a lot of flak for shorting from $29K. I got the typical, “you are a bit late” and “you are going to get caught on the wrong side of a short”. Although BTC had already dropped to $25K and since rebounded to $32K, there was a clear short indicator. You don’t short because the market drops but rather because you can see confluence that it will drop. Shorting from $32K was almost a guaranteed trade, provided you have some knowledge and trading experience. I ceased accumulation or dollar-cost averaging the moment the LUNA bomb went off. From the moment BTC breached the $26K/$25k level, the drop to $20K was pretty much guaranteed.

So Which Is Better?

Those that continued to dollar-cost average from $32K are currently not looking so good. If they were buying alts they are definitely regretting it now. Not everyone is open to the idea of shorting and that’s fine but not trading is also a trade. I mentioned to my readers a couple of times that I had ceased accumulation and was allocating passive income into USD. Usually, this capital would be utilized to accumulate alts. However, why on earth would I do that if there is basically a guarantee of capitulation? Would it have not been better to sit on your hands and hold USD? As I mentioned, the signs were pretty clear that the market would suffer further losses, especially alts.

Revising The Dollar-Cost Approach

Once a bear market is confirmed it is wise to redirect funds to stablecoins or cash. Hold these allocations until there is at least more chance of upside. You don’t have to perfectly time the bottom but it is extremely beneficial to avoid the worst of the collapse. For many, this is their first rodeo. Experience trumps opinion and even knowledge. Take it from those who have been here before. When a bear market hits, sit on your hands and wait for the worst to pass. Discounts at the offset of a bear market soon become floating losses and in many cases, realized losses.