Bitcoin Price Projection

As an experiment I wanted to see what would happen if I was to look at Bitcoins past rate of change pattern to see when the closest match occurred then take the price changes from that date and projected them forward into a hypothetical future chart.

The rate of change pattern is a plotted line of price changes day to day. The faster the price rises the higher the line will run and vice versa.

Here they are, I eventually will use multiple best match days and average them but for now, a six month pattern catches a pre bull run and projects a $79K USD price in the next few months. Although a three month pattern catches the 2013 peak and projects a decline below 5K USD before a run to $55K USD.

This is not meant to be a prediction and I would not recommend investing based on this information. It is only a thought experiment.

The six month chart doesn’t look right to my eye, I will double check the code.

The three month chart shows a price drop followed by a run in about 230 days time.

You can see in the charts that the actual data ends near the end and the rate and match lines zero out along with the dates.

This report is available at AlgoMega.com

Update:

There was an error in the way I was calculating the best pattern match. I was subtracting the current pattern from each of the historical price patterns but this doesn’t actually match the best pattern it just subtracts the current value from the historical price trends. Instead I changed the report to plot the matches using an inverted absolute value difference between the dates in the patterns. This way the best match actually finds the closest pattern. The results are much more sensible.

Here are the four month pattern results over the past eight years. It matches a peak so the subsequent price action is up a little.

These are the six month pattern results.

Obviously this is not a prediction and if you change the parameters you get different results every time. Because Bitcoin has always gone up over time these types of reports will always show a gain when projected out long enough.

Bitcoin Price Projection

I use reports at AlgoMega.com to get a sense for cyclical trends in the price of Bitcoin. Because the price has risen so significantly over the past eight years the past price history on a simple chart looks almost like a flat line but there are large scale timeline cycles that look, to me at least, somewhat predicable.

This report graph below shows the relative price drop from the last all time high. In this way we can see the price frequency trend between lows every few years and new highs. The price difference between these highs and lows is very significant and a trading strategy that buys during the most extreme levels of relative depth and small sells during high run ups in price as shown on another graph that plots the rate of rise over time should be relatively safe.

I’m posting this update today because while the estimated next all time high date is projected to be really soon, December of this year. The date fluctuates a lot between 2020 and sometimes out to 2021. This date is calculated by looking back through history where the trend is the same, price going up or price going down, and the relative position from the last high is the same and averaging the number of days until the subsequent all time high. I.e. this attempts to project the next all time high assuming the cyclical trend continues. Even if there isn’t a new all time high my prediction is that the price will cycle on a multi year time scale that can be traded. This next all time high date would project the time when the price will reach the past peak of $20,000.00.

Some guesses as to what the price will do after the next all time high follow:

Average gain rate: 6.87
Peak gain rate: 57.35
Last low price: $3303.81 USD
Future average price: $22700.37 USD
Next peak price: $189468.81 USD
Conservative peak price: $132628.17 USD (70% of peak rate)

Of course anything is possible and any future uptrend will depend on a wide variety of factors.

Bitcoin price projection from past cycles.

I am personally investing in Bitcoin because my judgement is that it will provide a gain in value independently of other investment options. Here is a summary of projections that I am using.

Previously I wrote about the timing of the next bull run based on the frequency duration average of past bull runs projected from the current time forward. The date for the next bull run lands around May, June or July of 2020. This is about one and a half years from now.

Today I have some projections on the price Bitcoin could reach if it follows a conservative repetition of peaks followed by long run ups.

This graph is still a work in progress but ruffly shows the btc price and logarithmic price along with the down from high (Red) and up from low (Green). The red line is used to identify market cycle lows for buying and the green line shows the relative price rise from lows for tracking when to sell. However the detection of cycle lows used to calculate the green line is a little buggy in places.

To get an estimate on the price of a possible future bull run peak I average the gains made from past cycles and multiply that factor by the projected current low of $3200. We may not have reached the bottom but the down from high chart shows that we reached levels low enough to be equivalent with past lows.

I have added the first run which is probably not relevant as the volume and market have changed significantly. I see an average low to peak value of 36. Or the peak was on average 36 times higher. So If I multiply the current low $3200 USD with 36x is $115,200.00.

If the next cycle achieves the same 57x gain as the last cycle (2017) the price should reach $182,400.00 usd and if the next cycle achieves a more conservative 17x gain from 2013 the price would reach $54,400.00.

This of course depends on increased adoption and investment from new users to achieve prices at this level.

 

Bitcoin Market Price Drop like 2015

The bitcoin price today has reached the same relative rate of decline as it did during the last major cycle almost four years ago. The decline has also taken almost exactly the same if just a few weeks early.

I’m posting this because I think its a rare event and I’m keeping an eye on the market for a correction and buying in.

The thirty day rate of change over time graph is showing that the current drop is so sharp that less than one half of a percent (13 days out of 8 years) of all past history exceeds it.

The drop from high cycle graph (red) shows the relative drop is now the same as it was in January of 2015. The time value (black) indicates that it has occurred slightly earlier than last time.

The average down from high data from this level to an all time high is 463 days, projecting forward that lands on March 14, 2020.

 

 

 

Bitcoin report projects the date of the next all time high

At AlgoMega.com I have a report the plots the relative ratio of the price as it compares with the last all time high. This is intended to show that the price cycles between periods of troughs and peaks.

The red line shows this ratio where 0 is an all time high and the higher the level reflects a drop. 1 would be a drop to a price of 0. Maybe I made this more complicated than it needs to be by inverting the trends.

I thought it would be interesting to project a possible date for the next all time high using an average of the past data where the ratio matches.

The process looks at the current DFH value and it’s trajectory noting if the price trend is down (bear market) or up (bull market). Then I collect all of the past dates having the same DFH value with the same trend.

The trend direction is important because the same DFH values have different times to the next ATH depending if they are heading down or up as a drop has to bottom out and return the other direction.

All of the DFH values are scanned forward to find the number of days to the ATH and the average of those days are taken.

So based on this method, when is the next all time high? It’s in 544 days on May 27, 2020.

 

 

Here is a markup image on how the calculations are made.

 

Update:

One hour later and the date is May 05, 2020. It is just an average so the value will jump around.

My thoughts on this result are of encouragement for the future of the market. I have read a lot of negative articles and posts on the web because of the recent price drop but over the long term these cycles repeat over and over. If you can wait a year and a half I am guessing that the price will in fact return to a new all time high or at least something interesting.

Anther very interesting date coming up in May of 2020 is the next mining halving from 12.5 btc per block to 6.25. This will reduce the production of currency into the next work going forward from that time.

 

Update Next Day:

Someone mentioned that they don’t like the implication there will be another all time high. So I think it’s more reasonable to use this projection as a possible future multi year high date.

Because the previous metric was inverted I decided to add a sin wave style graph oscillating a zero plane. This way you can see the cycles alternate between over and under valued. The light green line shows the drop from past high and the dark green line shows the same DFH value multiplied by the log value of the number of days since that peak.

 

Bitcoin Market Update

Since the BTC market is trading down about 35% in the past few days I thought I would write a quick blurb about my thoughts and personal trades.

I am buying small amounts at these prices and also anticipating the price will go down more from here. I made a withdrawal from an exchange in June of this year for a decent amount of dollars but it never came through. I asked to have the withdrawal canceled so I have the ability to buy right away. In Canada at least it can be difficult to move dollars to and from exchanges. I always keep a balance of cash in my bank account and stock brokerage accounts so that in the case where they go bankrupt I will have enough to pay taxes and live until I can move other assets around.

My thought is that BTC is a good thing to have as a long term investment. I think the chance of it becoming much more valuable in the next few years is higher than the chance it won’t.

The market tends to cycle through extreme peaks and valleys. Looking back you can see this between $0.30 – $30, $10 – $1000, $250 – 20,000.00. Being in a downtrend now I wanted to see how the current price relative to the last peak compares historically so I put a new report together.

The red line chart shows the relative level from the last peak. When the value is 0 that is an all time high. You can see that of all past data that I have collected only 8.7% of it has been been at a price level lower relative to the peak than is it currently. You can also see several trend reversals below our current level.

I think it’s reasonable for the price to go down lower so that it matches the same past levels but then hopefully it will continue in another uptrend.

Here is another chart I like to look at. It plots the relative rate of change. Currently the rate of decline in price is so fast that only 1.31% of the past data has exceeded it. I use this chart to sell when the rate of price rise approaches the previous maximums. When the rate of decline is low like it is now I buy small amounts regularly.

These charts are available at http://algomega.com. I plan on implementing email notifications of significant market opportunities as a service later on if there is any interest.

 

Update: Down From Peak with Time

Part of my interest in making charts to visualize relationships of price metrics over time is to find possible indicators that somewhat accurately measure the scenarios that correspond with with beginning of a bull run in order to buy and conversely the end of a run in order to sell.

In this case I have a drop from peak by time chart for use as a possible buy signal. The hypothesis is that the market runs up until it’s overvalued and people jump in and drive the price into a peak then it corrects and sags for a long period until everyone is convinced that the price has bottomed before people slowly start to reinvest. So I have added the time from the last peak as a multiplayer to the ‘down from peak’ value. This is because if the market is cyclical between under and overvalues states, the longer the market remains in a valley state the less likely it is to remain there. I suspect that people look at the price charts and recognize the undervalued state to buy in.

This report does accurately show the bottom price in 2015 as the black line is very high. The chart isn’t scaled very well in that it doesn’t show a consistent result between different cycles so I will keep thinking about this.

 

I don’t have much data for Ethereum, Litecoin and Dash but the charts are pretty interesting as well.

 

Update 2 – Nov 25, 2018

Just noting that after another day the price has dropped again and the rate of decline over thirty days is so fast that only 0.42% of past history or 11 days have been faster than this and only 2.92% of past history (76 days) has ever been lower from the last peak down from 9% two days ago.

Bitcoin Price Patterns to Predict Future Trends

I am putting together a report by overlaying recent Bitcoin price movements against the best matching past occurrences to see if there is any predicable continuation.

Currently there are no graphs or back testing to see how the different parameters affect accuracy.

I have some preliminary numbers based on comparing a dataset of 6 months, 8 months and 12 months then looking at the average outcome when looking forward from those matches out to four months.

6 Months  1        2        3        4      
 Upside  115  117  118  118 118  118  118  118 118  118  118  118  118  118  118  118
 Average  94  100  101  102  102  101  100  99  98  97  96  94  93  92  90  89
 Downside  105  96  95  93  88  86  85  81  78  75  73  72  69  67  62  58
8 Months                                
 Upside  115  118  121  126  133  149  160  165  166 166  166  167  171  175  178  183
 Average  94  103  105  108  111  114  118  121  123  124  126  126  127  127  127  127
 Downside  105  102  101  101  100  100  99  99  98  97  97  97  97  97  97  97
 12 Months                                
 Upside  117  128  134  159  195  251  297  323  333  341  350  352  353  362  368  374
 Average  95  106  113  122  132  146  163  178  188  194  199  205  211  216  221  226
 Downside  105  105  105  105  105  105  105  105  105  105  105  105  105  105  105  105

The columns are weeks projected into the future and the numbers are percentages. So when comparing 6 months of data to find the most similar past pattern the best outcome after one week is a return of 115%, the second week is 117% etc. All of these numbers are based on the price data pattern as of July 10, 2018.

A big disclaimer; this is not a prediction, just because the past data set closely matches does not guarantee that the trend will continue.

These are just a small sample of results with random parameters. When using a larger pattern to compare with past data can result in more specific matches but at some point reduce the amount of range to search through.

A big issue with this approach when comparing patterns on historical data is tuning the parameters to the dataset rather than fundamental patterns. This comes through in the fact that the 6 month pattern predicts a decline in price and the 8 and 12 month data set predict an increase in price.

I will have to experiment with back testing different parameters to get a good sense of accuracy if any on historical data and the future prediction. That will come later.

Update July 11, 2018

Here are a small sample of back testing results. The data samples are collected in days back from 180 all the way back to 1275 three and half years ago. The data sets were run using 6, 8 and 12 months of data respectively and the results are shown as projected average divided by the actual percentage change ninety days later.

 Days Back  1275  1095  910  730  545  365 180 
 Date 2014-10-02 2015-04-05

2015-10-07

2016-04-03

2016-10-25 2017-05-26 2018-01-10
 Price  $373  $254  $243  $418  $657  $2177  $14000
 6 Month Set  89/85  105/100  102/177  130/156  120/176  188/199  260/48
 8 Month Set  46/85  93/100  121/177  110/156  116/176  216/199  199/48
 12 Month Set  214/85  113/100  123/177  129/156  148/176  265/199  141/48

Overall the results were kind of interesting. There are some correlation but also some significant misses. More resolution and adjusted parameters may make this a more useful report.

Bitcoin Criticism – Broken Window Fallacy

I like to follow the wider crypto currency news and industry developments. I often come across wild exuberance and extreme criticism. Over time I have noticed that a lot of points against digital currencies that while valid at the time quickly change with the adoption of new people and technology.

Early on the most common criticism of Bitcoin was that it wasn’t worth anything. People were mining 50 BTC in blocks with hardware on there desktop. Anyone could accumulate hundreds of BTC if they wanted to unfortunately no one could have guessed that they would become as valuable as they are now. In hindsight it seems funny to criticize the absence of price when it is often the most significant characteristic to newcomers.

After the value criticism was that no one accepted it for payment. Only a handful of stores accepted bitcoin. While most businesses still don’t accept bitcoin there are a significant number now and new integration services that make it easy for new stores to start. Also now that the value Bitcoin is widely known more people are now willing to accept it in place of dollars.

The next criticism was that Bitcoin has no intrinsic value. It was common to compare it with the Dollar but in comparison there is no intrinsic value of the dollar. People also compared it with gold because you can hold it and that is true but it doesn’t mean that an electronic currency can’t provide value on it’s own.

Lately the criticism of Bitcoin is that the network doesn’t have the capacity to handle enough transaction volume to support a larger economy. While the core network is limited to about seven transactions per second there are many groups working on solutions that will allow significantly more in the next few years.

I’m not saying that criticism can’t point out valid issues with Bitcoin but in the context of changes already in motion it makes sense to make a hedged guess and use the opportunity as an investment.

One of the most bizarre criticisms that I disagree with is that Bitcoin, or others like it, can never be used in a functioning economy because the deflationary nature of currency issuance will cause people to save instead of spend. As a result businesses in their economy will not have enough customer demand to survive and the economy will collapse.

I believe that most people who make this criticism are viewing this as a variant of the broken window fallacy. The broken window fallacy says that destruction of a local town shop window is good for the economy because it necessitates the services of a local window repair person, thus earning them money to support their family. Of course this is a fallacy because the net result is a loss as the cost to the shop owner is more than the gain to the window repair man. The shop owner also would have used the same money paid the repair person to spend in the economy.

In this example the breaking of windows is analogous to inflation of the currency.

Most people have lived in a financial system that inflates savings for their entire life and simply can’t comprehend anything different.

In an economy with a different monetary policy people will still need to buy things in order to live. Currently with dollars there are incentives to spend because the value of dollars are eaten away as time passes. In a Bitcoin based economy the incentive might be to hold rather than spend if they are on the fence of a purchase. But people would still buy the things they need.

The key point is that people have to work in a dollar economy to replace the value that is eaten from holding dollars. Does this necessitate the creation of unnecessary work? Is the current expansion of production and consumption of natural resources unsustainable? I think so.

People right now need to work because in a fractional reserve based economy any assets are quickly eaten away with a small amount of deflation. Most people need full employment to just get buy.

I’m not suggesting that Bitcoin will become a predominant currency but rather than the hypothetical outcome isn’t necessarily worse than the current system.

Update:

As a counter point to the broken window fallacy comparison the argument has be made that the key point of the effect of deflation is reflected in the use of effective resources rather than the observation that some things are broken. In other words it is more desirable irrespective of currency system to make optional use of all available resources, human labour and capital as it provides opportunity for growth and leaning. Additionally people don’t hold dollars because of inflation and as a result don’t significantly suffer as a result. All interesting ideas.

Trading Bitcoin Manias

This post describes a trading strategy that I am using with digital currencies specifically Bitcoin. The system I use to trade is available online for free at http://algomega.com. To use it you would need to open an account on an exchange and that can take several weeks to complete.

My expectation of gains is high, 50% per year for the next two to five years. In my eyes this is an opportunity for gains if the market continues it’s volatility and or upward trend. Even as a small portion ones invetments this strategy could add a boost to financial independence.

These high expected returns make a big difference. As a comparison, I met with a financial advisor recently about managing my stock and bond investments. I currently hold self directed accounts and do rebalancing myself. The management fees of the financial advisor in the ballpark of 1.5% meant he would be making 65% of the income I wanted to withdrawal on for living expenses. That is a lot. If Bitcoin does go up by 50% per year it could be used to make gains not possible elsewhere at the same level of risk.

This strategy is based on the assumption that the price of Bitcoin will go up over the next few years. Trading the extreme peaks and valleys reduces the risk of buying at an all time high and also grow a cash reserve hedge. It’s pretty clear that Bitcoin has done well in the past but there have been times where people have bought in at a price that quickly dropped and then it took years to recover. This strategy hopes to reduce the likelihood of this happening by indicating times when not to buy when the market is overbought. This strategy also keeps a cash reserve as a hedge so that if the price was to drop unexpectedly you have some assets remaining to buy in or use for other purposes.

I personally believe that there are several reasons the price rise is likely but I won’t cover them all here. Some of the top reasons include the rapid activity of the developer community, improvements to the software and supporting infrastructure and businesses starting to work with digital currencies, the increasing user adoption rates and the gradually reducing production supply of the currency all play parts in my personal assessment.

The mania is a metric that measures rate of change both up and down over time. When the price rises at a rate that is higher than 99% of the past historical trading data then it is seen as a good indicator to sell a portion of holdings as the price and rate of rise always reverts in the other direction. The same applies to drops in price. When the price falls at a rate that is faster than 99% of the historical data it has always followed a reversal upwards and is a buying opportunity. When everyone is selling cheaply people panic but it has historically been the best time to buy.

The trends measured take into account a long term timeline. This means I look at trends based on the largest frequency of price cycling to reduce the risk of being caught out from an unexpected trend reversal. The long term objective is to accumulate bitcoin and trade when the indicators mark opportunities that only occur a few times per year at all. This makes it a low time commitment strategy.

btc_mania

Here is an example report showing the Bitcoin price (Blue) against the mania (Red and black). You can see that durring the past price spikes the mania levels went above 1.5 and this would have been a good time to sell and definatly not a good time to buy. Durring the downturns when the mania droped below 0.4 the price has over time gone up and this has been a good time to buy in my experience.

A lot of people tend to think that they need to trade daily or weekly on short term trends but this is more work and not something that I do. I originally started out down this road and there is a reason why I don’t do this any more. I wrote a stock and crypto trading bot that used a genetic algorithm to learn an optimal strategy for profitable trading. After letting it run for months and years the bot did make a lot of money but less than simply buying and holding Bitcoin or dollar cost average buys.

This is not financial advice. Any investments you make are at your own risk. The value of Bitcoin or any other digital currency could for unforeseen reasons go to zero. It is important that if you buy into these currencies you are aware and can accept this risk. Only buy an amount that you are comfortable loosing.

 

Minimizing Your Risk When Investing In Bitcoin

OneLife_Slider2

When the price of Bitcoin hits all time highs, as it has been for the past few months, people often ask me how they can buy. But then they worry that the price is about to drop once they do buy for the first time.

This happened to several people I know during the 2013 spike where the price peaked $1100 USD then proceeded to drop below $300 over the following three years.

2013

Now that the price is $4200 up from $1000 six months ago, how do you gauge the likelihood the price will drop? It is possible to do market research and make an assessment of what the price will do but ultimately there is no surety it will go up even if all signs point that way.

In order to protect yourself from price drops you can use a hedging buy strategy to accumulate Bitcoin over the long term in a way that reduces your losses when the price goes down.

Here is a buy strategy that will reduce the effect of declining prices after purchase. This will reduce the amount of time where you are holding a loss on your purchases and also reduce the amount of loss when the prices drop so that you have more equity in case you need it unexpectedly. 

On a regular interval, once per month, make a regular investment of a fixed amount of dollars into two parts, one use to buy Bitcoin on an exchange at the current market rate and the other half portion set aside a pool of cash. Each purchase make an entry in a spreadsheet to keep track of the date, purchase amount, cash pool contribution and then calculate your average purchase price from all of your purchases.

If the price rises continue adding equal portions to new BTC purchases and your cash pool. If however the price of Bitcoin falls below the average purchase price from your past buys then in addition to making your regular BTC purchase and cash pool contribution make an extra BTC purchase using your cash pool. The amount to purchase can be up to the same ratio of the total available cash pool as the drop in value of BTC relative to the amount you paid for it. For example if the price of Bitcoin drops to seventy five percent of what you paid for it use 25% of your cash pool to buy more BTC at the lower level.

This will have the effect of reducing your average purchase price because. When the market makes large drops for extended periods of time this gives you the opportunity to make use of the cash pool to purchase at a lower price. In the event that you need to pull out BTC or cash unexpectedly you will have both cash and BTC that you can sell at a price closer to the market.

It is important to make purchases on a regular schedule however and not make these cash pool purchases too frequently or you risk disrupting your allocation from small market corrections.

Also note that this strategy implies that you are speculating on future price actions. While this strategy does better than buying 100% Bitcoin of your monthly contribution if the price goes down, it will not return the same gains if the price continuously goes up. You are trading some upside potential for downside risk protection.

Feel free to adjust the recipe to your taste and let me know how you do with it. Other possibilities would be to invest the cash pool in another liquid asset that will return interest.

Why do this? It’s extra work but if you compare it to other investment options it may be a good fit if you want to claim a stake in the cryptocurrency market but are not comfortable with the psychological effects of a massive market downturn right after you buy in for the first time.

How does it perform? If you were to start investing at the market peak in December 2013 as an example and simply put $200 aside each month where $100 goes to purchasing Bitcoin and the other $100 into a cash reserve you would end up with the following month to month gains:

Bitcoin Market Value Bitcoin Gains Cash Reserve Amount Invested Invested Gains
$100.00 $0.00 $100.0 $200 $0.00
$163.55 $-46.89 $200.0 $400 $-36.44
$275.40 $-36.67 $300.0 $600 $-24.59
$300.97 $-124.79 $400.0 $800 $-99.02
$348.69 $-198.61 $500.0 $1000 $-151.30
$424.95 $-242.32 $600.0 $1200 $-175.05
$645.06 $-123.97 $700.0 $1400 $-54.93
$775.77 $-93.68 $800.0 $1600 $-24.22
$854.94 $-115.27 $900.0 $1800 $-45.05
$868.31 $-205.36 $1000.0 $2000 $-131.68
$776.22 $-414.75 $1100.0 $2200 $-323.77
$784.58 $-531.99 $1200.0 $2400 $-415.41
$963.04 $-467.16 $1300.0 $2600 $-336.95
$880.85 $-680.18 $1400.0 $2800 $-519.14
$761.81 $-966.09 $1500.0 $3000 $-738.18
$905.85 $-971.69 $1600.0 $3200 $-694.14
$971.69 $-1055.28 $1700.0 $3400 $-728.30
$995.69 $-1187.72 $1800.0 $3600 $-804.30
$1145.67 $-1180.93 $1900.0 $3800 $-754.32
$1301.41 $-1157.91 $2000.0 $4000 $-698.58
$1649.25 $-922.68 $2100.0 $4200 $-450.74
$1371.18 $-1339.30 $2200.0 $4400 $-828.81
$1518.44 $-1322.99 $2300.0 $4600 $-781.55
$1997.18 $-952.61 $2400.0 $4800 $-402.81
$2271.77 $-781.29 $2500.0 $5000 $-228.22
$3322.65 $168.12 $2600.0 $5200 $722.65
$2963.19 $-290.33 $2700.0 $5400 $263.19
$3424.88 $70.87 $2800.0 $5600 $624.88
$3541.65 $87.07 $2900.0 $5800 $641.65
$5569.32 $1983.19 $3000.0 $6000 $2569.32
$5521.94 $1809.35 $3100.0 $6200 $2421.94
$4940.52 $1115.27 $3200.0 $6400 $1740.52
$5307.50 $1366.10 $3300.0 $6600 $2007.50
$6095.08 $2026.52 $3400.0 $6800 $2695.08
$8553.84 $4310.38 $3500.0 $7000 $5053.84
$9344.36 $4914.58 $3600.0 $7200 $5744.36
$10111.96 $5485.55 $3700.0 $7400 $6411.96
$11112.97 $6274.96 $3800.0 $7600 $7312.97
$16094.53 $10938.43 $3900.0 $7800 $12194.53
$26040.85 $20343.25 $4000.0 $8000 $22040.85

After investing $8000.00 over four years your net assets would be worth $30,040.85. This is a 93% yearly return on total capital thanks in part to the uptrend at the end of the run in 2017.

Notice that when using the 50/50 cash/Bitcoin buys the Invested Gains is higher than the Bitcoin Gains when the market is negative. This is what you are gaining with the cash reserve.

The purpose of hedging each monthly investment in cash is to reduce the amount of losses each month where you are holding less in market value than you invested. However by doing this you are reducing some of the upside gains if the market goes up. If you had invested all of the $200 each month in Bitcoin your net assets would be worth: $52,081.70 a 162% yearly gain on total capital.

When using the cash reserve to buy during times when your market value is lower than your purchase price puts you somewhere in the middle of these options returning $43,510.60 using a small purchase amount. Although this reduces your ongoing cash reserve as you as using it to buy Bitcoin when the price is lower.

These different buying strategies illustrate to me how asymmetric the Bitcoin market has been. While you can reduce your monthly losses with a cash reserve by about 50% (up to $600 in some months) the overall cost in this particular time frame is $22,040.85 as this is how much more you would earn buy putting $200 per month into Bitcoin rather than $100. That is how much you are paying to hold more liquid assets thought the four years.

Disclaimer: This is not investment advice and is only my personal thoughts on possible options for purchasing Bitcoin. One of the challenges on choosing an investment strategy in Bitcoin is that because the market is so volatile even small changes in the timeframe of past data will give you a very different result. This makes it very easy to choose a strategy that works on past data but doesn’t necessarily take into account future trend possibilities. In other words, make sure you do your research and be certain you are comfortable with the results if the market goes down, up or flat.