As the bitcoin price continues to drop, the cryptocurrency still outperforms other asset classes year to date and via dollar cost averaging.
Bitcoin’s price is continuing its long slide since June. As the Dow set another all time record high Monday, bitcoin took another steep plunge below $7,000.
A second drop off Tuesday sunk bitcoin to $6,600.
Crypto analysts point out “dismal” trading volumes create a perfect storm for volatility. Lower volume makes its easier for whale-sized trades to rock the boat.
Chainalysis data suggest PlusToken scammers have recently sold off 25,000 BTC after a hasty exit from their crypto ponzi scheme.
But despite the latest setbacks (and there will undoubtedly be more), bitcoin fundamentally remains a trustworthy store of value for disciplined savers who have time to wait it out.
With BTC’s characteristically wild price swings, it’s easy to think the sky is falling when the price swings downward. But that’s hardly the case.
The problem with fearful apprehensions about the bitcoin price (or gleeful obituaries like an NYU economist’s last month), is their timescale is too narrow.
The statement “bitcoin is down,” begs the question, “Since when?” And over its one decade-long existence, you don’t have to go back far to find that, “bitcoin is up.”
Dollar cost averaging is an investment strategy of spreading out investments at regular intervals. It’s a less risky way to invest in volatile securities.
DCA also makes for a good analytical tool by removing the arbitrariness of saying “bitcoin is up (or down) since (X date).”
And as the Dollar Cost Averaging BTC chart above shows, investing in the crypto gradually over time has been a remarkably profitable way to save.
In fact, if you started dollar cost averaging a weekly investment in bitcoin the day it reached an all time high of $20,089 exactly two years ago, you would still outperform the same strategy with the Dow Jones Industrial Average or gold over the same period.
If we go back to a more arbitrary measure, bitcoin’s performance for the current calendar year, it still beats stock market benchmarks after six months of losses.
As of Monday, an investment in BTC on Jan. 1 returned a greater profit than the Dow, the NASDAQ Composite, or 2019’s top stock.
Bitcoin rang in the New Year at $3,410 USD. At the moment the Dow closed another record day Monday, bitcoin was trading for $6,868 per coin.
That’s a 100.01% return on investment year to date.
The Dow Jones Industrial Average opened at 23,058 on Jan 2, 2019’s first day of trading. It closed Dec. 16 at 28,235 for a 22.45% ROI.
Tech stocks have led the bull market in equities. The NASDAQ composite opened the year at 6,506, and closed at 8,814 on Dec 16, a 35.47% ROI.
Even the top performing stock for 2019 didn’t hold a candle to bitcoin’s year. New York cosmetics company, Coty (NYSE: COTY) saw the most growth in 2019. Its rise from an opening Jan 2 price of $6.46 to a Dec 16 close of $11.01 was a market whopping 70.43% ROI. Still not as much as bitcoin.