Backtested DCA strategy suggests selling Bitcoin at ‘extreme greed’ most profitable
Selling off a portion of Bitcoin (BTC) when the market is in a state of “Extreme Greed” is a more profitable investment strategy than just buying and Holding it, a Redditor’s analysis suggests.
Redditor “sorrow” shared a March 21 analysis found that there’s a higher return on investment (ROI) when using the Fear and Greed Index to dictate a dollar-cost averaging (DCA) strategy compared to a “vanilla” DCA strategy.
Skograw’s “benchmark” strategy involved DCA’ing $100 into Bitcoin once a week, starting from March 17, 2018, to Sept. 9, 2023 — which netted 124.8% return on investment.
The second strategy involved a tiered DCA plan, which would buy $150 of Bitcoin each week during times of Extreme Fear, $100 if in Fear, $75 if in Neutral, $50 if in Greed and $25 if in Extreme Greed.
The third strategy was the same except it would sell 5% of the accumulated Bitcoin each week if in the Extreme Greed zone. This turned out to be the most profitable strategy, with an 184.2% ROI, compared to the benchmark of 124.8% and the no-selling strategy of 140.1%.
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