Extreme Greed" Selling Strategy Yields Higher Bitcoin ROI, Redditor Analysis Shows
Summary:
An examination by Reddit user "skogsraw" suggests that selling a portion of Bitcoin (BTC) during periods of "Extreme Greed" offers better returns than just buying and holding. The study involved three distinct strategies: standard dollar-cost averaging (DCA), tiered DCA based on market conditions, and the same tiered DCA with selling during Extreme Greed. The last strategy offered the highest return on investment (ROI) of 184.2%. The analysis aligns with observations that market corrections usually occur when investors are overly greedy. Skepticism was noted on the results of two more complex strategies tested by skogsraw.
An analysis shared by Reddit user "skogsraw" suggests that divesting a share of Bitcoin (BTC) during periods labeled as "Extreme Greed" is a more lucrative tactic for investors than merely purchasing and holding the cryptocurrency. Skogsraw's analysis from March 21 showed a higher return on investment (ROI) using the Fear and Greed Index as a guide for implementing a dollar-cost averaging (DCA) strategy as opposed to standard DCA.
The baseline strategy adopted by Skogsraw involved investing $100 in Bitcoin weekly from March 17, 2018, to September 9, 2023, which generated an ROI of 124.8%. He paired this with a second approach: slotting varied DCA amounts based on market sentiment. This involved purchasing $150 Bitcoin during Extreme Fear, $100 during Fear, $75 in Neutral times, $50 during Greed, and $25 in Extreme Greed.
The same plan was then adjusted in a third tactic but involved selling 5% of the gathered Bitcoin each week during the Extreme Greed phase. This strategy emerged as the most fruitful, recording an 184.2% ROI, outperforming the baseline ROI of 124.8% and the no-selling strategy’s 140.1% ROI.
Skogsraw did not disclose the rationale behind his choice of dates. He conceded that the process hadn't been double-checked and that the tests also needed to be performed over a wider range of timeframes. His findings also did not consider the Bitcoin network’s trade fees, which usually spike during Extreme Greed periods. Nevertheless, Skogsraw believes these results robustly advocate for customizing your DCA strategy.
The current score of the Crypto Fear & Greed index is 75 out of 100, marking a 'Greedy' market sentiment. This represents a 15-point decline from its score of 90 or "Extreme Greed" on March 5. The analysis aligns with observations made by Crypto Fear & Greed that market corrections usually occur when investors become overly greedy.
Skogsraw additionally ran the "AlphaSquared Risk Model DCA" and "PI Cycle Top Indicator" strategies, yielding ROIs of 385% and 332.4% respectively. But observers have raised doubts about the outcomes of these two intricate data-driven trading techniques.
Published At
3/22/2024 7:04:19 AM
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