The weighted average cost of purchasing Bitcoin has recently reached a level that signifies all investors who have consistently dollar-cost averaged into Bitcoin are now in the black, regardless of the duration they have been holding the cryptocurrency.
Despite the price of Bitcoin in US dollars still being down by over 50% from its all-time high of around $69,000, this news indicates that those who have been engaging in the practice of dollar-cost averaging into Bitcoin are now experiencing profits.
In the cryptocurrency space, there are still financial experts and analysts who believe that Bitcoin’s overall existence and market capitalization of nearly $600 billion is based on some form of Ponzi Scheme. On the other hand, there are those who argue that saving in this hardest form of money ever known has proven to be an excellent investment strategy, surpassing all others in terms of performance.
It is important to consider the current macro environment and how it may change in the future, as well as its potential impact on different asset classes and their performance. Additionally, it is crucial to evaluate the risk/reward ratio offered by various investment strategies and determine whether diversification or going all-in provides better returns.
To understand the significance of dollar-cost averaging into Bitcoin, let’s examine some data that sheds light on the topic. For years, investors at Adamant Research have pointed out the favorable risk/reward ratio of Bitcoin, asserting that it is currently the most favorable long-term investment in the world. They predict that Bitcoin will trade in a range of $3,000 to $6,500 before the emergence of a new bull market. Similar statements were made during the bear markets of 2015 and 2011.
When comparing the performance of dollar-cost averaging into Bitcoin with other assets, there is a significant difference. Traditional investments such as a 60/40 portfolio, gold, and real estate have significantly underperformed Bitcoin over the past five years. This highlights the superior performance of Bitcoin and the effectiveness of dollar-cost averaging as an investment strategy.
Many asset managers follow the practice of diversification, where profits from one asset are taken and distributed to other assets. However, when comparing this strategy to going all-in on Bitcoin, it is clear that it would involve selling the winner to buy the losers. Over the past five years, the BTC/USD price has increased by 376%, while the S&P 500 and gold have only seen gains of around 55%.
Taking profits from Bitcoin and reallocating them to other assets would have resulted in a significant decrease in portfolio potential. The income generated from dividends would not compensate for the capital gains that holding a large Bitcoin position would provide. Therefore, the risk associated with playing it safe and pursuing diversification becomes apparent.
Proponents of Bitcoin and the dollar-cost averaging strategy argue that Bitcoin serves as the ultimate hedge against monetary inflation and financial market uncertainty. Despite the efforts of critics to destroy this narrative, it has prevailed. The recent banking collapses in 2023 and the subsequent rally in Bitcoin price provide evidence of Bitcoin’s resilience.
The meme “money printer go brrr” gained popularity due to its correlation between the growth of M2 money supply and the price of Bitcoin. While money supply and velocity have recently trended downward, it is unlikely that the magic money printer has disappeared completely. It may lie dormant for a period before resurfacing.
Hodlers, who have embraced the truth about Bitcoin, have been rewarded by the cryptocurrency’s performance. However, it is important to note that investing in Bitcoin and other cryptocurrencies still carries risk, and readers should conduct their own research before making investment decisions. This article serves as general information and should not be considered legal or investment advice. The views expressed here are solely the author’s and do not necessarily reflect the views of Cointelegraph.
Despite Bitcoin’s current price still being down by over 50% from its all-time high of around $69,000, the weighted average cost of purchased Bitcoin has reached a level indicating that investors who have consistently dollar-cost averaged into the cryptocurrency are now in profit, regardless of how long they have been holding it. This news challenges the notion that Bitcoin’s existence and market cap are based on a Ponzi Scheme. Instead, it suggests that saving in the hardest form of money known has been an excellent investment strategy, outperforming traditional investments.
However, there are risks associated with investing in Bitcoin, and volatility is a given. To adequately analyze the potential of dollar-cost averaging into Bitcoin for the long-term, it is important to consider various factors such as the current macro environment and its potential impact on different asset classes. Additionally, comparing the risk/reward ratio of Bitcoin with other investment strategies and evaluating the benefits of diversification versus going all-in can provide useful insights.
Data shows that Bitcoin has outperformed traditional investments over the past five years. The favorable risk/reward ratio of Bitcoin has been highlighted by experts who predict the emergence of a new bull market. They have previously made similar statements during bear markets.
A comparison of the performance of dollar-cost averaging into Bitcoin with other assets demonstrates the significant difference. Traditional investments such as a 60/40 portfolio, gold, and real estate have significantly underperformed Bitcoin. This supports the argument that Bitcoin is a superior investment and dollar-cost averaging is an effective strategy.
While some asset managers follow the practice of diversification, going all-in on Bitcoin has proven to be more profitable in recent years. Taking profits from Bitcoin and reallocating them to other assets would have resulted in a decrease in portfolio potential. The risk associated with playing it safe and pursuing diversification becomes apparent when considering the significant gains from holding a large Bitcoin position.
Bitcoin’s role as a hedge against monetary inflation and financial market uncertainty has been consistently supported by proponents. The recent banking collapses in 2023 and Bitcoin’s subsequent rally further validate this narrative. The correlation between the growth of M2 money supply and the price of Bitcoin has been well-documented, indicating that the magic money printer has not disappeared.
Hodlers who have embraced Bitcoin have been rewarded with its strong performance. However, it is important to note that investing in Bitcoin and cryptocurrencies still carries risks. Readers should conduct their own research before making investment decisions. This article serves as general information and does not constitute legal or investment advice. The views expressed here are solely the author’s and do not necessarily reflect the views of Cointelegraph.
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