In recent times, the adage "Keep calm and just DCA" (Dollar-Cost Averaging) has become a staple in the cryptocurrency community. But just how effective is DCA, especially when starting at the peak?
A recent analysis shared on r/CryptoCurrency sheds light on this. The study looked at the top 15 crypto coins, excluding stable coins, at their all-time highs (ATH). The approach? A disciplined DCA investment of $100 every month starting October 9th, a month before ATH, and continuing for a total of 24 months, amounting to an overall investment of $2400.
Here are some key takeaways:
- Ethereum’s stagnancy: Despite its popularity, Ethereum failed to turn a profit in this scenario. Throughout the two-year period, not once did Ethereum move into the green.
- BTC and XRP shine: Bitcoin (BTC) and Ripple (XRP) were the only cryptocurrencies that yielded a positive return on investment.
- Surprising stability of LUNC: The cryptocurrency LUNC showed only a 60% loss, which might be attributed to the specific DCA timing. The investment was made during the extreme point of a crash, and LUNC has remained more or less stable for the subsequent 15 months.
- Infinite vs. limited supply: Contrary to some beliefs, there was no noticeable performance difference between coins with a limited supply and those with an infinite one. These labels of inflationary or deflationary were based on the coin's behavior over the past year.
In conclusion, the study stresses the importance of doing due diligence. A disciplined DCA strategy can indeed be effective, but not without proper research. It emphasizes the need to base investment decisions on a coin's underlying tokenomics and use cases rather than just personal attachment or belief in its founders. Blindly DCA’ing can lead to potential investment failures.
