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Backtested DCA strategy suggests selling Bitcoin at ‘extreme greed’ most profitable

News Feed - 2024-03-22 01:03:19

Brayden Lindrea4 hours agoBacktested DCA strategy suggests selling Bitcoin at ‘extreme greed’ most profitableA Redditor suggested selling 5% of one’s Bitcoin during times of “extreme greed” produces higher ROI than just hodling it like everyone else.4239 Total views26 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksSelling off a portion of Bitcoin (BTC) when the market is in a state of “extreme greed” is a more profitable investment strategy than just buying and hodling it, a Redditor’s analysis suggests.


Redditor u/skogsraw shared a March 21 analysis that found that there’s a higher return on investment (ROI) when using the Crypto Fear & Greed Index to dictate a dollar-cost averaging (DCA) strategy compared to a “vanilla” DCA strategy.


u/skogsraw’s “benchmark” strategy involved DCA’ing $100 into Bitcoin once a week, starting from March 17, 2018, to Sept. 9, 2023, which netted a 124.8% ROI. 


The second strategy involved a tiered DCA plan, which would buy $150 of Bitcoin each week during times of “extreme fear,” $100 if in “fear,” $75 if in “neutral,” $50 if in “greed” and $25 if in “extreme greed.”


The third strategy was the same, except it would sell 5% of the accumulated Bitcoin each week if in the “extreme greed” zone. This turned out to be the most profitable strategy, with an 184.2% ROI, compared to the benchmark of 124.8% and the no-selling strategy of 140.1%.Results of u/skogsraw’s five-part test measuring BTC’s ROI with various trading strategies. Source: Reddit


The Redditor didn’t explain why they chose the dates they did but said it wouldn’t have been fair to choose a market bottom or top. The period covered at least two major bear markets and one bull market. 


u/skogsraw, however, admitted the tests haven’t been cross-checked and emphasized that testing should also be conducted across more timeframes.


u/skogsraw’s findings also didn’t factor in Bitcoin network fees to trade, which often peak during times of “extreme greed.”“Regardless these are very convincing results in favor of adjusting your DCA strategy. Hope you find it useful in the upcoming bull!”


The findings are in line with the Crypto Fear & Greed Index’s view that market corrections typically occur when investors get too greedy.


u/skogsraw also ran two other strategies — “AlphaSquared Risk Model DCA” and “PI Cycle Top Indicator” — which produced ROIs of 385% and 332.4%, respectively.


Commentators, however, called into question the results of the two complex data-driven trading strategies.


Related:Crypto greed index hits highest level since Bitcoin’s $69K ATH


The Crypto Fear & Greed Index score currently sits at 75/ 100 or “greed.”


It has fallen 15 points since March 5, when it notched 90/ 100 or “extreme greed” — its highest score since Feb. 20, 2021.Crypto Fear & Greed index score for March 22. Source: Alternative.me


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