Bitcoin Reaches 6-month Low. Should You Buy

In the previous 2 articles, nosotros laid down the premise and scaled-downwardly the fourth dimension periods to understand when you should buy Bitcoin. In this commodity, we’ll narrow it down to quick and frequent moves with a surprising upshot and layout the conclusions.

Like before, the rules at the start are maintained for this iteration which will look at two indicators, the 50-day moving average (7DMA) and the 7-solar day moving average (7DMA). Permit’s see how it turned out.

50-day moving average

The 50DMA is important in pairing with the 200DMA, as it forms the golden and decease crossovers. More than that it forms a good base of operations to build an effective short-term price momentum strategy every bit information technology indicates a strong upwardly or down price movement for over a month. And then, how frequently would you lot end up buying Bitcoin in 2020 using the 50DMA?

50DMA Value
No of buys 304
Average price  $ nine,983.eleven
Entries 6
Exit 5
Total moves 11
Price per motility  $     907.56
Turn a profit
(against thirty October)
35.2%
Profit per buy  $       32.84

As with the switch from 150 to 100, the motion down to 50 has decreased our profits and increased our buy counts and moves. For a total of 304 trading days, Bitcoin’s daily price has traded above its 50DMA in 2020, broken up as vi entry positions, and 5 exit positions. Firstly, the entry positions, or merely the ‘press play’ on your DCA button started as early as 6 January and were very on and off, meaning the tendency to check and change your DCA was frequent. Farther, yous would take exited or ‘press pause’ on your DCA push button and finish buying Bitcoin 5 times in the twelvemonth, taking your total moves to 10. On the bright side, you’d pull down your average buying price to $9,983.

You lot’re not in the clear yet. Despite the buying price beingness lower than the previous scenarios, and your profits at 35.two percent against the cost of BTC on 30 October, your absolute profits aren’t higher. Firstly, since you are making a full of 304 buys, increasing the average count of your profits, the turn a profit per buy comes up to $32.viii, lower than the three previous scales. Additionally, the price per move, drops down to $907.5, for the 11 moves at an boilerplate toll of $ix,983. Similar earlier, the smaller the time period, the less the price momentum and the lower the profits.

7-twenty-four hour period moving boilerplate

At first, this was just added as a cautionary tale, simply information technology turned out to be an outlier. The 7DMA, or simply the moving average on a weekly basis is the shortest of the lot but doesn’t follow the tendency we’ve been seeing. Until now, with every drop in period i.e. from 200DMA down to 50DMA, the profits have dropped, but not for the 7DMA. So, how often would you end up ownership Bitcoin in 2020 using the 7DMA, and how does it fare?

7DMA Value
No of buys 172
Boilerplate cost  $ 9,661.24
Entries 25
Exit 24
Total moves 49
Toll per motion  $     197.17
Profit
(against 30 October)
39.7%
Profit per purchase  $       56.17

Unsurprisingly, with the 7DMA, you’d finish up making a lot more moves but surprisingly, you’d end up buying Bitcoin on fewer days. For instance, Bitcoin traded in a higher place its 7DMA for but 172 days in the first 10 months of the yr. This gives yous a total of 49 moves, split almost evenly between entries and exits. This means that you would’ve pressed play on your DCA 25 times and pressed pause 24 times. The average price for each of these 172 buys would exist $nine,661.two, notably lower than the previous four approaches, but that’s non all.

Not only is your profit margin at 39.5 percent, which follows the trend as we move lower downwards the period scale, simply your profit per buy equally well. Using this approach y’all’d end upwards with a profit per buy at $56.1, significantly college than even the largest period scale used i.e. 200 days. This means that even with a shorter trend, giving yous a lesser degree of price momentum, the vii-solar day tendency bears substantially higher profits. which is astounding in and of itself, simply looks fifty-fifty better when laid out together as we’ll see below.

Fine print

The motive of this exercise was to understand when is the correct time to buy Bitcoin and hold it, using just one indicator (scaled across time menstruation), and dollar-cost averaging it throughout. While initially, the findings pointed to a articulate relationship between the larger the time menses / hence stronger the price momentum, and the greater the profit, the 7DMA has thrown information technology out of wack.

As can be seen in the chart above, the profit per purchase decreases from the 200DMA downwards to the 50DMA, but the 7DMA indicates a much higher profit. The 7DMA, with its turn a profit per buy at $56.one is xx.6 percent higher than the 200DMA’southward turn a profit, non counting fees of course. Still, this means that riding on short-term price momentum, other things equal, from Jan one to October thirty, the 7DMA would give you a college profit per buy than any other moving average. However, y’all’d still have to contend with pausing and re-playing your DCA 49 times. A key reason for the high profit in the 7DMA is its lower trading days, seen below.

The chart above is practically the changed of the profits per purchase, showing the 7DMA with the least and the 100DMA with 172 active tradings, and the 50DMA with the most at 304 agile trading days each. These two factors – increasing profit per buy, and decreasing trading days point to the overall theme of college profit with lower trading activity, significant that even if you lot were to modify your DCA strategy, using a moving boilerplate of your choice, the simple rule of ‘less is more‘ is bound to pay you
more than
dividends.

Source: https://eng.ambcrypto.com/bitcoin-when-should-you-buy-and-when-should-you-wait/

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