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Show HN: Bitcoin investing using Dollar Cost Averaging strategy

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Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#21

Post by quantdev »

jstanley wrote: post #20
quantdev wrote: post #18

Earlier quoted context omitted.

Manually? So every week you do 30 separate trades on Bittrex? Seems like a lot of work and also you have 30 transaction fees (including the spread cost) for only $100. I like this idea, but only if it's scripted and for more than $100 per run.

Transaction fees (including the spread cost) on cryptocurrency exchanges are typically a percentage rather than a fixed amount. So it doesn't matter if you do $100 every week or $400 every four weeks.

Yes, you're correct -- my mistake. Bittrex's fees are 0.25% of each trade.

My point about doing 30 trades every week manually is a lot still stands though. Maybe I'll try scripting this with Bittrex's API. It would be cool to have an option to scale each trade size by the current relative market cap, so you can have your own crypto index fund.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#22

Post by jdeibele »

bkolobara wrote: post #2

> The investor purchases more shares when prices are low and fewer shares when prices are high. If you never sell you never lose.

Would that were true. There are any number of companies that get close to zero (Theranos) and others that do go out of business (see 2008 - Lehman, Washington Mutual, etc.)

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#23

Post by netinstructions »

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day.

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?

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#25

Post by fiatjaf »

netinstructions wrote: post #23

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. 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?

You're right. All these investing "strategies" ignore these costs.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#26

Post by hidiegomariani »

netinstructions wrote: post #23

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. 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?

the fees depends on the exchange. In this case are 0.26%. Even if you dont use Dollar Cost Avg you loose those fees anyway

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#27

Post by quantdev »

netinstructions wrote: post #23

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. 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?

You're somewhat missing something. Take the Exchange Gemini: I send USD to Gemini and then I purchase BTC on Gemini and am charged a 0.25% fee on my purchase. So far I haven't paid any transaction mining fees and it's because Gemini isn't actually settling these transactions on the blockhain.

Now, if I were to move these coins off Gemini, then I would pay the mining fee of $2. However, I could just wait 5 weeks and only pay that once, since the fee doesn't scale with the transaction amount.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#28

Post by pdog »

A better approach with an extremely volatile asset like Bitcoin is a simple tactical asset allocation strategy.

For example, the following system significantly outperforms both buy-and-hold and dollar-cost averaging strategies.

    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.
That's it. Market timing improves the risk-adjusted returns with minimally increased transaction costs versus a buy-and-hold strategy.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#29

Post by gricardo99 »

netinstructions wrote: post #23

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. 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?

I think you're referring to the blockchain transaction costs, and thus assuming each daily purchase of bitcoin is transferred on the blockchain. Another approach would be to accumulate bitcoin in an exchange account (off-blockchain), and withdraw the balance to your bitcoin wallet (i.e. on-blockchain transaction), on a less frequent basis, perhaps monthly. That would mean more like ~$990 invested.

Re: Show HN: Bitcoin investing using Dollar Cost Averaging strategy

#30

Post by krrrh »

quantdev wrote: post #27
netinstructions wrote: post #23

The example says they want to invest $1000 over the course of 3 months, so 1000 / (3 * 30) = 1000 / 90 = ~11$ / day. 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?

You're somewhat missing something. Take the Exchange Gemini: I send USD to Gemini and then I purchase BTC on Gemini and am charged a 0.25% fee on my purchase. So far I haven't paid any transaction mining fees and it's because Gemini isn't actually settling these transactions on the blockhain. Now, if I were to move these coins off Gemini, then I would pay the mining fee of $2. However, I could just wait 5 weeks and o…

Leaving the coins on the exchange for that long requires an exchange-hack-or-failure cost averaging analysis to balance things out.
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