In 2020, which investment strategy of quarterly, monthly, or daily average cost method for Bitcoin yielded the highest returns?

Bitcoin dollar-cost averaging is an investment method often favored by conservative investors and Bitcoin Hodlers in the cryptocurrency market. When to invest and how much to invest are common questions for many investors. According to the foreign media Ambcrypto, they tested the performance of dollar-cost averaging based on daily, monthly, and quarterly periods, and surprisingly, the strategy of daily investing has yielded the highest returns so far this year.

Due to the different periods which may result in fractional investments, Ambcrypto also adjusted the investments accordingly to make the funds invested in the three periods roughly equivalent. The individual returns are as follows.

Monthly Dollar-Cost Averaging

Assuming $300 in Bitcoin is invested on the first day of each month, 11 investments have been made so far this year, totaling $3,300. This is a popular investment strategy among many investors. But how does it perform?

In the scenario above, investing $3,300 would yield 0.0349 BTC. Selling at the Bitcoin price of $13,756 on the last investment day (11/1) would result in a value of $4,812 and a profit of $1,512 (45.8%).

Quarterly Dollar-Cost Averaging

Although considered a conservative investment strategy, quarterly investments may not yield as high returns due to missing the lows of March with longer intervals between investments, as shown below.

Investing $900 on the first day of each quarter starting from January 1st, and subsequent investments on 4/1, 7/1, and 10/1, totaling $3,600 would yield 0.4416 BTC, with a profit of $1,096 (45.8%) upon selling on October 1st at the Bitcoin price of $10,634.

Daily Dollar-Cost Averaging Wins Big

Assuming daily investments of $10 from January 1st to October 31st (305 days), a total of $3,050 would yield 0.33466 BTC. Selling on October 31st would result in a profit of $1,561 (51.21%).

Overall, daily dollar-cost averaging may yield the highest return, but it is also the most challenging to execute. It requires daily operations and constant exposure to price fluctuations. Additionally, the success of daily DCA is partly attributed to the significant drop in March this year, allowing accumulation of Bitcoin at lower costs during March and April, potentially contributing to slightly higher returns compared to monthly DCA.

Essentially, Dollar Cost Averaging (DCA) is the so-called "periodic fixed amount investment," a seemingly unremarkable strategy that even investing guru Warren Buffett admires. Readers interested in utilizing DCA can explore tools like "dcaBtc" to calculate the most suitable DCA approach for themselves.