It is hard to always know what happened, but frequently if someone invests too much then they are expecting the price to go down and not prepared for it to go down, and surely there can be advantages to the BTC price going down, even if you had preferred for the price to go up, which is buying more when it goes down.
So it can take a long time to actually get ahead of your investment in order that the price is always coming to you rather than you going to the price, so if you just continue to buy in a DCA kind of way, that can be one way of getting ahead of the BTC price, even if it might take 2-3 years to actually get to a point that your cost per BTC is actually less than the current price. It is not guaranteed to happen, but so far anyone who persistently buys BTC, has been ending up getting into profits, even though sometimes it could take 2-3 years before the "being in profits" stage can actually end up happening.
A person who panics, and does not continue to buy but then sells and buys will likely NOT really get to any kind of stage in which his./her holdings is in front of the price.. and it seems such a simple strategy to merely just continue to buy (sure buying on the dip is fine, but buying at any price might well end up being fine in order to keep a person in the right kind of mindset of continuing to build the number of BTC that s/he has in his/her holdings and keeping some faith that that BTC is going to be profitable in the future.. even though it is not guaranteed, it has been a pretty good place to put money and likely to continue to be a good place to put money.
Is it a form of risk that accidentally becomes a burden on their minds so that they are unable to survive when the price of Bitcoin drops significantly? Indeed, investing large amounts of money or doing it all at once will affect their minds because they do not yet have a strong mentality when the situation turns around to what they expected.
In that context, investors who start with the DCA strategy may be better prepared when the market situation changes suddenly because they can buy more BTC and those who are not mentally strong may be quite stressed by this situation. However, the essence of this point is of course that long-term investment planning requires many things that must be prepared in advance, such as being mentally ready to face all changes that occur at unexpected times. Being a loyal holder of Bitcoin requires strong mental strength to be able to carry out what has been previously planned.
Many times there are trade-offs, and even though DCA tends to be the best, DCA might not be the best for a person who has a lump sum of money currently available, and it might be better to lump sum most, if not all of that money, and then perhaps just have money to continue to buy if the price dips.... that is why a newbie to bitcoin likely needs to consider the three categories of 1) DCA, 2) Lump sum and 3) Buy on dips, and perhaps have some money allocated to each of the three categories, and if s/he chooses to eliminate any of the categories, then s/he would have at least weighed the pros and cons of each of the categories.
So a person who suddenly has $6k available could divide the $6k into 3 parts, and then maybe also consider what to do based on considerations of anticipated cash coming in too.. so if the next 6 months, the person also has $6k of extra cash coming in, then that is going to be $12k over the next 6 months, and then another consideration might be how many BTC does s/he already have. Maybe if s/he had already been buying bitcoin for a year then the perspective would be different from a brand new investor, and even as compared with someone who might have been buying BTC for 6 years or more. How highly DCA would factor into the various situations is going to likely play out differently, especially if we also include some of the other factors such as view of bitcoin as compared with other assets, which other assets are already owned, risk tolerance, timeline, time, skills and abilities to trade, reallocate and/or to learn more as things go along.
But so far, perhaps I myself have never done one strategy, namely Lump sum and it is still foreign to me.
Just because you have never done it, and/or maybe you never considered it either because it is possible that you have not been serious about bitcoin for the past 7.5 years since you registered your forum account and/or you have not had any lump sum come in your direction for the past 7.5 years.
Even a small amount of money outside of the normal cashflow might be considered a lump sum, even for poor people, and if someone is investing $10 per week into BTC for the last two years (a total of $1,040), and all of a sudden he has an additional $600 or even $1200, he has a lump sum situation on his hand and if he decided that he is going to allocate it towards bitcoin, then he should consider all three categories, even if he might choose not to pursue all three categories, but it can become much more empowering for someone who usually is ONLY able to buy $10 per week of BTC to suddenly have more options and perhaps 1 or two years of his/her prior investment all of a sudden come available for considerations regarding what to do about it.
Well, I use two other methods, DCA and Buy on dips. Yes, because I am not experienced enough and have to improve myself to continue learning from what you have explained. This situation made me add one word for me to learn and that is lump sum.
I think it becomes more relevant once you have established a BTC accumulation plan and if you are following such plan, then if you suddenly have money come available to you, then you might consider investing it rather than spending it right away, but sure, maybe you will decide to ONLY invest half and to spend the other half on consumption goods. Those are choices that come to people who either come across extra cash, or it could come from a situation in which you are deciding to reallocate some investments that had been building for a while, and the mere choice to reallocate may create a scenario in which all three categories of funding should at least be considered, even if you end up rejecting and/or minimizing one or more of them.
That trade off doesn't fall into the category of long-term investment, right?
The trade off has to do with how you are thinking about your ways of investing, and sure it could have long term repercussions, yet if we are presuming that you already have a long term plan, then the idea of lump summing part of your investing (or it could also be referred to as front-loading your investment) most likely is affected on how you are viewing BTC's shorter-term price performance prospects, and since it sometimes can be dangerous to get too far into trying to predict shorter-term BTC price movements, we might create some stresses on ourselves if we end up employing one of the practices more than the other and then retrospectively seeing that we would have been better off to have had employed a different one of the practices.
I doubt that anyone can exactly figure out your own trade-offs, but there may be ways to talk through those kinds of potential trade-offs in a thread like this, whether you come across a certain situation yourself, you expect to come across a certain situation, or maybe you want to try to learn from a mistake that you may have made in the past regarding these kinds of matters.
Even I feel as if I could be perceived to be contradicting myself from time to time in terms of batting around these kinds of terms because surely I agree that DCA is the best practice for almost any newbie, but there are going to be situations in which there may be some desires to front run the investment with a lump sum or to defer buying right away by setting some money aside for buying on dips... so if you don't know what to do, then surely it seems the better of the decisions would be to just DCA and maybe hold back a little bit of your available funds so that you don't feel like you don't have enough money to buy more BTC if there is a further dip, but at the same time if you have a regular cashflow, or if you might have overly built up your emergency funds, you might already feel that you have plenty of cash on hand, so you don't necessarily feel any advantage towards holding back money to buy on dips.
From the other angle, yeah, maybe lump sum buying would not come up as often, but surely some people who have regular jobs might even realize that they have bonus money coming in once or twice a year, and if they do not pre-plan to use that money for their expenses or for some consumption good, they could allocate some or all of that extra pay towards lump sum investing into BTC... and so as long as any of us have been serious about wanting to accumulate more bitcoin, then I would think that from time to time there are going to be situations that come up in which lump summing becomes one of the options that are available.
As far as I know, they play for short term investments, when there is profit, they don't forget to take it.
Sure, sometimes any of us might refer to some short term strategies to over invest and then to cash out, but we are not really talking about those kinds of ideas in this thread. In this thread, we are mostly attempting to talk about long term accumulation strategies, so long term accumulation strategies should be your way of considering the topics, unless someone here might be explaining some kind of a short-term (and likely mostly off topic) kind of considerations.
My earlier example of the extra $6k and the $6k for 6 months would be the kind of cash that has come available and/or can be considered for investing into BTC... whether it is invested over 6 months or it is front loaded or whether some kinds of cash is left aside for buying on dips, these are all buying strategies, and they are not short term trades... or anything like that.
So I get the sense that you are easily distracted just like a lot of people who are looking for short term gainz because they are seeing the upcoming halvening and things like that, and sure we might want to consider how much to buy and to front load our investment because we are concerned that the BTC price might go up, but we end up kind of screwed if we frontload our investment and then the price goes down and we have no money to buy on dips and we also have no money to DCA because we blew too much of our available cash wadd too soon.
If I understand this point from what you explained, maybe someone who has a large amount of money will easily play roles in the 3 categories you have mentioned.
It is not about having a large amount of money, but surely it helps if you get some extra money, then lump sum becomes more relevant than if you are barely getting by with whatever you are able to invest, such as $10 per week... so sure, the 3 categories are more relevant for people with more money, but the fact that anyone is poor does not mean that they should not be considering the three categories when they might get some extra cash, even if it might only be a few months worth of DCA.. which might be a couple hundred dollars for the person who usually ONLY does $10 per week of DCA.
But one thing that might be quite interesting is when they divide their funds into 3 categories and if at this stage the market situation is in a bullish condition, are these 3 categories really good enough to apply or is DCA better?
You don't necessarily apply the three, but you consider whether you should apply any or all of the three, and you decide what you are going to do. There may be a lot of situations that come up in which you reject anything but DCA, and surely if you don't know what to do, then probably it is better to just DCA any extra cash that you get into BTC and skip all other strategies, but as your BTC stash increases, you are likely going to want to become a bit more creative and more regularly considering all three of the BTC accumulation strategies rather than just defaulting to DCA, even though there is nothing wrong with DCA, but if you had been buying
$10 per BTC for the past 8 years, and you invested $4,180 and you had accumulated 1.65 BTC (currently valued at right around $62,370 - which is right around 15x in profits), then you might be in the mood for some other strategies, especially if your income still ONLY gives you $10 per week to invest into BTC, even after 8 years of ongoingly buying BTC with that method.
Of course, if you want, you can continue to DCA, but it may not necessarily be in your best interest to stick with that same strategy since your circumstances had changed, even after a few years, your situation had also already changed, but if it were to have had taken you 8 years to figure out that your situation had changed, then maybe you are not studying your options enough or paying close enough attention?
Many times there are trade-offs, and even though DCA tends to be the best, DCA might not be the best for a person who has a lump sum of money currently available, and it might be better to lump sum most, if not all of that money, and then perhaps just have money to continue to buy if the price dips.... that is why a newbie to bitcoin likely needs to consider the three categories of 1) DCA, 2) Lump sum and 3) Buy on dips, and perhaps have some money allocated to each of the three categories, and if s/he chooses to eliminate any of the categories, then s/he would have at least weighed the pros and cons of each of the categories.
Well said mr JayJuanGee, I as a person would even recommend accumulating bitcoin using lump sum because, we are very close to the halving and any time from next year, we'll be experiencing the halving, so DCA and buy the dip should be kept on hold for now, so we can concentrate on accumulating as much as we can using lump sum. However, this bull run might take us to another all time high, so missing out this opportunity or not having enough bitcoin in your portfolio shouldn't be an excuse except, you can't afford to buy more due to some financial constrain. Now is the time for every bitcoin enthusiasts to step up their accumulation game by aggressively using lump sum to make huge buys and avoid the sell button.
I am not even recommending lump sum, but I am recommending that there might be times in which we might want to consider changing our strategy and we have three options.. and if we end up buying way too much BTC and then the BTC price corrects instead of goes up, then we might have had ended up putting ourselves into a worse situation. These are not easy decisions to make, but surely we have more options if suddenly we come across an unexpected bonus, but some guys decide to go out and take loans and other things like that, and I am not even recommending those strategies, even though sometimes they do seem to end up paying off quite handsomely, especially if you have other sources to pay back the loans in case that BTC prices do not end up moving in your favor in the coming 6-18 months or however long that you are expecting to need to have the BTC prices going up rather than down or sideways.
