I like to think that DCA is the best method or strategy in almost every situation, even if a person has lump sum it just depends how disciplined and aggressive the person is with his DCA.
Guys need to consider the circumstances in which they come accross the new money.
Let's say that a guy with a $30k per year income had been investing $100 per week for two years, and one day he all of a sudden received some kind of a pay out or an amount of money that added up to around $5k, which is equal to a whole year of his prior DCA amounts.
I think the guy should at least consider all three options, including potentially putting 1/3 (or some other amount that he considers to be reasonable) in each of the categories
It also may differ if the guy is brand new to bitcoin (like ONLY 1 month in) or if the guy had been accumulating for 2 cycles already, so he had already invested around $40k into bitcoin.
Guys account for their situation, and it is up to them how to do it, but they should at least consider all three options.
Yeah I get that situations and circumstances can affect the method or strategies an individual employs to use, It’s also important to consider all three strategies cause they’re also good if not they wouldn’t be considered strategies and also a good mix is good but I’ll still say in 70% of those situations Dollar Cost Average has the best results.
But at the end of the day an individual has to choose what’s best for him and his financial status.
The one who lump sum will do better if the price ends up going up, and the one who DCA'd will end up doing better if the BTC price ended up going down.
Even if the guy has suspicions about the potential BTC price direction, mostly he does not know in advance if the BTC price is going to go up, down or sideways.
I think lump sum is most beneficial in times of dip,
That is not called lump sum. That is called buying the dip.
Sure if you get a lump sum and the BTC price had been dropping for the previous week or two, and you think that the dip is not over, then sure, you could be correct that some advantage comes from buying as the price is dipping, even though the price direction could reverse at any time.
Yeah that’s why I say it’s most beneficial at the dip, when you lump-sum at the dip so that’s called Buying the dip? And not lump sum, I think it should be both cause you’re buying with a huge amount a lot more than you normally DCA, my thoughts though you have the better experience and understanding.
If the goal is to accumulate more bitcoin faster and cheaper at all times DCA gives us that, yet there are rooms for other strategies and this is because investors differ and their financial strength differs too, I think people who can afford to lump sum and wouldn’t mind are those who have gone far in their bitcoin accumulation or those who have a lot of discretionary money at their disposal and is still accumulating consistently and aggressively as possible on the DCA. There are cases where an individual’s lump sum is just someone else’s regular DCA.
He might not consider it a missed opportunity if he had already been buying for two cycles or more.
Surely the shorter time that he has been in, then probably he would be better to error on the side of buying right away, so even in my case of $5k, he might invest $4k right away (like over the space of 1-2 weeks) and then maybe he saves $1k for buying on dips, so then he might have 3 orders of $333 each for every 5% that the BTC price goes down, and with the expectation that he might end up holding parts if not all of the $1k rather than investing it at dip prices that might not end up happening. He ultimately figures out an approach that is based on his own psychology and his finances, but it also depends on how much BTC he had already accumulated (and when and how he made those prior BTC purchases).
time.
I totally agree with you if the individual has been accumulating for two cycles he must have accumulated a reasonable amount or already at over accumulation stage depending on how whimply or aggressive he has been, and must have garnered enough knowledge to know when best to lump sum or wait for dip or not. The strategy you used as an example with the $5k is also good mix of strategies.