When we hold Bitcoin in real life, we see that it has both advantages and disadvantages. If we look closely, owning Bitcoin for a long time can provide possible rewards.
One of these advantages is that it provides high profits and inflation protection, but it also involves large risks due to volatility, regulatory uncertainty, and security issues. Before making any investing decisions, think about your risk tolerance, financial objectives, and understanding of the bitcoin market.
Volatility is only a big concern if you plan to hold bitcoin in short term. If you hold it long term, like about 5 years, volatility is not your concern because price is strongly upward.
ROI chart shows this fact
https://casebitcoin.com/charts#roi_chartChoose different time frame like 1 year, Year to date, 2 years, 3 years, 5 years and see different ROIs. With 5-year ROI chart, I am sure you will see no concern with Bitcoin volatility in short term.
Interesting historical comparative charts on that casebitcoin.com website.
I don't have any problems comparing them, but yeah, they are different categories of things and each of them can work well under certain kinds of circumstances, and surely a person who has a lump sum available has options regarding how to consider investing, whether that is lump sum all of it or to perhaps lump sum part and maybe even DCA other parts and buy on dips with other parts.
A person who does not have a lump sum available has to just deal with cash as it comes in, and in some cases, there are folks who do not have good habits of saving and/or investing and maybe they don't even really know how to do it, so DCA would likely be better for them because they can just choose an amount to invest over whatever period of time that is based on how much disposable income that they have, and if they were to save it in cash and then invest it later, then that may or may not be practical, but it could end up being a form of lump sum that is buying on dip if they really think that there might be utility in terms of waiting when they get into BTC.. which it is never really clear when those periods of long and deep correction are going to happen and at the same time, even if they happened in a certain pattern in the past, it is not even close to assured that such long and deep corrections are going to happen in similar ways in the future... even though bitcoin's ongoing volatility is likely inevitable, we just can never really be sure of the direction (especially in the short-to-medium term, even if even if we can develop theories and even probabilities).
If you are going to invest in Lump Sum manner then price is very important at which you are investing your whole money.
I don't think about it like that, because I don't believe in any waiting around when it comes to trying to figure out when to get into bitcoin, so to me it does not matter what the price is, there is a need to get in and to get off zero as soon as possible. There is no way to prepare for UP, unless you have some bitcoin.
So then the question merely becomes how to get started, and is there any desire (and/or ability to front load with a bit of a lump sum, and if so then perhaps some value should be thrown in as a lump sum right away).. then the other part would be figuring out what to do after making the initial investment, but if you have at least made an initial investment then you have some level of preparedness for UP, and so then you would therefore be in a better position to wait for down if you had already bought some.. and waiting for down can be buying on dips and/or DCA.
So then at that point, it might matter what is your budget and what are your goals and if you lump sum with total your goal, then you still might need to consider buying on dips and DCA just to buttress your investment in case price goes down rather than up, but if you have invested less than your goal then maybe you already built in the ability to DCA and buy on dips. so of course DCA is a kind of time-released way of investing and buying on dips is price based.
Like as I already said, investing 20k$ when price of Bitcoin is 67k$ will lock your investment for indefinite period of time while investing same amount when price of Bitcoin is 20k$ is better option.
It would have had been stupid to invest $20k at $67k if that was all the money that you had for the next 6 months, but it would not be stupid to invest $20k at $67k if you had some DCA amount of maybe $1k or $2k per month that you could buy or some other funds that you could buy on dips... I am not going to proclaim the whole ratio, but anyone could have looked at the charts and saw that $67k was on an upward trajectory, even if many folks were expecting higher prices such as supra $100k or even higher, and I even had my own charts that had supra $1.5 million within them (yeah only less than a 0.5% chance, but it was still listed as a possibility) (see
this post of mine from December 2021).. but still I don't have a lot of sympathy when folks play only one direction, and especially if they were to invest $20k at $67k and then sit on their investment for the next 2 years without investing more.. since surely anyone could have continued to invest and maybe over 2 years, they could have had invested another $20k
So let's do the math.
Initial purchase of $20k at $66,667 = 0.3 BTC. and then to
DCA $200 per week from December 1, 2021 until now would have resulted in $22.8k invested and 0.9374 BTC. So that would mean a total of 1.2374 BTC (currently valued at $53,208) and $42,800 invested. So that would not be a bad place to be, and part of my point is that if someone is wiling to put $20k at the then top of the BTC price, they better also be prepared to continue to invest, otherwise they were gambling and not investing and I have little sympathy for folks with that level of lack of preparedness and/or overinvesting in those kinds of ways.
So even if a person took a strong front loading stance, even at the top of the market, they likely are still able to figure out a way to have some kind of follow through rather than merely whining that their initial investment was still not in profits.
My own way to frame this kind of investment would be to divide the 6 month budget into 3 parts and then to invest 1/3 into each of the three parts (which is lump sum, DCA and buying on dips), so if the total budget was $20k then that would be $6,667 into each of the three parts. But if the person had $20k in pocket and then an income of that might allow for $300 per week for the next 6 months, so then maybe the whole budget for 6 months might be considered to be considered as $27,800 (which would be 26 x $300).. so then if that is divided into 3 then each of the three parts would be $9,2667, and so after the end of the 6 months there might be a reassessment regarding what to do in regards to continuing with DCA and/or if there might be any more buying on dips and/or lump sums.
I am not suggesting that I know the answer, but those should be the kinds of consideration for anyone who is investing into something like bitcoin and coming into the investment when the price is seeming to be in an upward direction, and so part of my point is that there is no need to wait, but still at the same time there are needs to have abilities to follow through and to commit especially if anyone is thinking that he has $20k that he can lump sum invest into BTC when the prices were at $67k.
If you know anyone who did that and has been sitting on their hands for the last 2-ish years, I would say that they surely were lacking in their abilities and their foresight and their making a reasonable investment plan that would have likely ended up being way more profitable than the way that they came at the situation.
You are right in saying that we don't know exactly when its bottom or just the start of dip. So one has to do that risk analysis if he is trying to invest in Lump sum manner.
I have nothing wrong with lump sum, and I think it is a very good plan; however, if the price moves against you, you are going to be fucked if you don't have conviction to keep investing, and if you come to an investment such as bitcoin without any more conviction than to throw $20k at it at $67k , then you deserve what you got.
While in case of DCA there is less risk involved compared to Lump sum.
I would not really say that we do DCA because there is less risk, even though there is some truth that it likely takes more capital to justify anyone who might do a lump sum should be ready, willing and able to justify why he is doing it that way, and I am just not sure why such a person would not be ready, willing and able to follow up if he invested $20k at $67k.. and sure maybe your example is not that great, but people use these kinds of examples all the time, to describe the poor schmuck who lump sum invested at the top, and again, I have no sympathy for such smucks or for such whining stories... especially since we can look at BTC charts and see that it has been the best investment for 13 years, so why would not anyone coming into bitcoin at least do a wee bit of looking at price history in order to temper his "investment" approach?
In DCA, all you need is to accumulate Bitcoin slowly and based on historic data DCA for 4 to 5 years has been a profitable strategy.
Sure if the DCA person does not have any lump sum that is available, then he is looking at his discretionary/disposable income and deciding how much he is able to invest based on those kinds of limitations, so he can be as aggressive as he is able to be, but yes, he is limited by his discretionary/disposable income.. which is the difference between his income and his expenses.... but within that he could choose to invest 100% of his disposable/discretionary income, and that might be aggressive.. .. and surely if anyone is investing 100% of his discretionary/disposable income, he is going to need to have some variations of emergency fund, float and/or reserves in place.. even if non of that is authorized to be allocated (or invested) into bitcoin.