But I'm wondering, what if you have a substantial amount you intend to invest in Crypto, let's say $100,000? How would you use DCA in that case?
- For me, my approach is to divide my capital into three parts. Every time Bitcoin corrects more than 20%, I put in one part of the capital. From the beginning of the year until now, I've only executed one of these parts. The other two parts are still waiting for the next correction cycles.
If I remember correctly, the price of Bitcoin was $20,250 as of January this year, and to have such a substantial amount of money, I would have just invested in all of it. The reason is that Bitcoin will not go back below $20k this year or even next year. In my opinion, Bitcoin has given people the opportunity to buy when the price was $20k at the beginning of the year and even was below $19k last year, which means no investor will see the $20k price again till probably the next bear market.
Having been in the Bitcoin space for some years now, I think there are some low prices I will see Bitcoin drop to, and I might not consider using the DCA at the moment. The reason is because if I buy at the low prices, let's say $15k–$20k, I know that definitely the price will spike again and go above that, which will guarantee me a huge profit. All I have to do is hold my asset tight, sit back, and wait for the bull market.
Of course, you are correct Dr.Bitcoin_Strange that there can be quite a few advantages towards lump sum investing, especially when it seem that price might have either dipped or might not go down any further.
There are no guarantees that they will end up going up, but it does seem that you are a bit more prudent when you buy on dips and you also consider that sometimes there are advantages to frontloading your BTC investment, even if there might be further dips, especially if you have longer term plans.. which also gets us to one of the reasons that it might not really matter that much if you buy at $30k or $28k or if you were able to get some at $25k or $20k, but in the end, we may or may not get any more opportunities to even buy sub $30k.. so there could be advantages to putting it all, even though when I get lump sums like that, I prefer to consider all three of the buying categories that involve buying right away, DCA and buying on dips, so it is a matter of personal perspective (and discretion) to the extent that the weighings in any of the categories might deviate from a 1/3 default or if more or less might go in one or more of the categories.
I have checked and analyze what you said JJG. You have to consistently watch and time the market for the dip to come before you could lump sum. You speak only but a few advantages towards lump sum investing and neglect the disadvantages of it. While most people don't do lump sum is because of market timing. It's not certain to predict precisely when the price dip will occur at any given time, and you don't always have the fiat to hold and wait for the decline, as you're unaware of its timing.
Statistically speaking to avoid wrong timing of the market if I see a lump sum like that I wont buy immediately because of the dip, I will still do it the DCA way but this time huge amount because i see no harm in spreading it out over several weeks or month.