Lump sum (LS): one initial all-in purchase
Dollar cost averaging (DCA): even purchases made over a period of time
LS is a much better #bitcoin savings strategy compared to DCA.
The following analysis calculates the returns of each strategy across multiple time periods.
The longer the time period, the more likely LS will outperform a daily DCA strategy. In general, LS outperforms on up swings and DCA outperforms on down swings. Over the 3 & 4-year periods, the only time DCA outperforms is near cycle tops!
🟠: Lump Sum > DCA
🟢: DCA > Lump Sum
https://pbs.twimg.com/media/Fo9CkjcWYBYOyk-?format=jpg&name=large
These figures show the returns for each analyzed period and with varying degrees of an initial LS + daily DCA. The bottom represents a 100% daily DCA strategy and the top represents a 100% LS strategy. The middle would be a 50% initial LS + 50% daily DCA strategy.
https://pbs.twimg.com/media/Fo9C7vTWYA4GFQY?format=jpg&name=large
https://pbs.twimg.com/media/Fo9C9r_WYA0uUw0?format=jpg&name=large
https://pbs.twimg.com/media/Fo9C-5PWYAUO_Fo?format=jpg&name=large
https://pbs.twimg.com/media/Fo9DAP-WYBwmeyL?format=jpg&name=large
Over all time periods, the median return of the LS strategy is much greater than the median return of the daily DCA strategy. The longer the time period, the more pronounced this difference becomes.
LS is a high risk, higher rewards strategy. DCA is a more conservative strategy.
https://pbs.twimg.com/media/Fo9Dj31XEAA1ksv?format=jpg&name=large
https://pbs.twimg.com/media/Fo9Dp-xWYBIMIhM?format=jpg&name=large
https://pbs.twimg.com/media/Fo9Dqw0WYAIs07c?format=jpg&name=large
https://pbs.twimg.com/media/Fo9DrlxXsAE9jRk?format=jpg&name=large
In summary, the LS strategy consistently outperforms the daily DCA strategy across every analyzed time period and throughout all of #Bitcoin's history.
When saving in #bitcoin, time in the market beats timing the market!
Data source: Glassnode
Sponsors: BTC Times & Satoshi’s Journal
V4V donations gladly accepted! ✌️🍎🍻
https://pbs.twimg.com/media/Fo9J4XjXwAEQpxK?format=jpg&name=medium
Wouldn't lump sum also be even more effective though by using leverage? Take out a low interest personal loan for the amount you were going to lump sum anyway