The re-balancing system (of which dollar averaging is a variant) is described in the Fortune's Formula book [1] as something that Claude Shannon [2] would demonstrate in his lectures at MIT as a mathematically proven guaranteed winning strategy. At the end of the talk there was a Q and A, and the first question always was "do you yourself use this system", to which he replied "Naw, the commissions alone would kill you".<p>[1] <a href="https://www.amazon.com/Fortunes-Formula-Scientific-Betting-Casinos/dp/0809045990" rel="nofollow">https://www.amazon.com/Fortunes-Formula-Scientific-Betting-C...</a><p>[2] <a href="https://en.wikipedia.org/wiki/Claude_Shannon" rel="nofollow">https://en.wikipedia.org/wiki/Claude_Shannon</a>
I wrote a bot that did something similar on the cryptsy exchange - it didn't pull in any new cash, it just tried to re-balance every time it ran.<p>It was making a small profit until cryptsy got hacked and lost all of my coins :(<p>Here's the source if anyone is interested though: <a href="https://github.com/nfriedly/Coin-Allocator" rel="nofollow">https://github.com/nfriedly/Coin-Allocator</a>
Some years ago everybody involved with the cryptocurrency universe had a relatively good understanding of economics, markets, agent incentives, game theory and so on -- even if these people didn't mention any of these terms, they seem to have a natural, logical, grasp of everything that was needed (not much).<p>Now it seems that people come to cryptocurrencies without knowing a thing, misunderstanding the way people act and the incentives involved, but at the same time making heavy usage of the terms "cryptocurrency game theory", "cryptocurrency economics" etc.<p>Not to say that this DCA thing is wrong or anything, but I've seen people here trying to create speculation strategies using charts and correlations produced by Python scripts, and lots the new cryptocurrencies and tokens are deadly wrong on their assumptions and incredibly poor in their features, like Bancor or Tezos.
The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day.<p>But aren't the transaction fees (at least for Bitcoin) something like ~$2 per transaction? So you'd end up only investing ~$820 instead of the target of $1000 and losing the rest. Am I missing something?
Well, I recommend buying everything at the moment you decide you want to buy, no matter the price.<p>Anything different than that is likely to give you headaches.
It requires some maths (and some faith in the Black-Scholes model, but it works okay in historical simulations), but you can do this instead. To lock in a price for some stock or foreign currency for a given delivery date:<p>- Buy an European call and write an European put at this value. This neutralizes your exposure to fluctuations in price; OR
- Helpfully calculate that the "delta" for delta-hedging this portfolio is 1/[present stock price] and replicate the put/call combo: when the market goes up 1%, you buy 1/S stock; when it goes down 1%, you sell 1/S stock.<p>To see why, look at <a href="https://en.wikipedia.org/wiki/Greeks_(finance)" rel="nofollow">https://en.wikipedia.org/wiki/Greeks_(finance)</a><p>Otherwise: try it with a spreadsheet program.
There is plenty of empirical evidence showing that DCA doesn't work, and only provide a psychological value. Why are people still using it? And for Bitcoin?
FWIW, this is a feature on coinbase-- you can just have them ACH charge your bank account a fixed amount each day, each week, each month, etc (each hour maybe?).<p>Unfortunately the better deal is moving that money to GDAX and buying there... which is a bit hard to do at $11 a day.
A better approach with an extremely volatile asset like Bitcoin is a simple tactical asset allocation strategy.<p>For example, the following system significantly outperforms both buy-and-hold and dollar-cost averaging strategies.<p><pre><code> 1. Buy when the monthly price of Bitcoin is greater than its 10-month simple moving average (SMA).
2. Sell (and move to cash) when the monthly price is less than its 10-month SMA.
</code></pre>
That's it. Market timing improves the risk-adjusted returns with minimally increased transaction costs versus a buy-and-hold strategy.
"Bitcoin investing" sounds a bit like an oxymoron to me (more like speculating).<p>Anyway, dollar-cost-averaging looks like a great strategy if you are very bullish on a asset which also happens to be quite volatile.
When I saw this initially, I thought this'd be a bunch of graphs detailing how you would have done to invest using DCA at different times in the past, and at different amounts.<p>I'd be interested in seeing that as well.
Is it true that the vast majority of all Bitcoin mining happens near hydro plants in China? If so, regardless of anything else, doesn't that expose Bitcoin users to significant state actor risk?
Just buy Bitcoin Today and hold it for a year. Then hold it for another year. Buy it with money that you don't ever need again. Don't do so much that you feel like you woud be in trouble if you lost it all and don't do it with so little that doubling that money in a year would not be worth the rollercoaster that is bitcoin ownership.<p>The week after I bought mine, it dropped nearly 30% and now it's up nearly 90%. There was a series of emotions because I probably bought enough to be very very engaged but not enough to be in big trouble if it went south.
a few years back I made a similar DCA website, you can find it at: <a href="https://coinsavers.net" rel="nofollow">https://coinsavers.net</a><p>The site has helped me to take the timing anxiety out of buying; it was initially made as a SAAS, but I've abandoned that idea. Please don't sign up with too many ;)
levels did it <a href="https://gist.github.com/levelsio/ee9539134035492ba77a7be1b49ed832" rel="nofollow">https://gist.github.com/levelsio/ee9539134035492ba77a7be1b49...</a>