This article is for a US service for dollar cost averaging, Swan Bitcoin. For Europe, while the strategy is exactly the same, please use Relai.
Liftoff: The Merits of Automating your Bitcoin Investing (Swan and Chill)
Bitcoin is an entirely new asset class and it’s being adopted exponentially around the world.
Although Bitcoin is the best performing asset (+10,000%) over the last decade, its price can be volatile and hard to predict in the short term.
In fact, Bitcoin is down ~40% from its recent high price of $64k.
How should Bitcoin investors react to the recent price volatility? What’s the best strategy?
Let’s examine the merits of automatic recurring purchase plans (dollar-cost-averaging) compared to “trying to time the market,” or, “trading bitcoin.”
Long-term conviction + short-term uncertainty = dollar-cost-average (DCA)
Short-term price changes in Bitcoin are hard to predict.
But what about long-term?
Bitcoin appears to be growing at an exponential rate similar to the growth of the internet in the 1990s and mobile phones in the 2010s.
Here’s the famous “S-Curve” technology adoption chart mapping Bitcoin’s rise in the US.
Since the long-term trend is clear, we can ignore the short-term noise and focus on accumulating Bitcoin.
“Stay humble, stack sats”
This is Bitcoin speak for “dollar-cost-average.” The phrase was popularized by co-host of Tales from the Crypt podcast and Swan Advisor, Matt Odell. Around here we like to call it “Swan and chill.”
Bitcoin’s recent price correction illustrates another reason to Swan and chill.
Although price corrections are healthy, they can be stressful for traders, short-term thinkers, and anyone trying to time the market.
You’ve probably heard the phrase, “time in the market beats timing the market.”
Luckily, we don’t need to time the market. Regular recurring purchases outperform active trading on a risk-adjusted basis.
Not to mention, most of Bitcoin’s price increases happen in relatively few days (~10) each year.
By trying to time the market, you risk missing out on these big price increase days, which will destroy your returns.
Bitcoin has averaged roughly 160% annual returns over the last decade.
However, if you remove the top 10 days per year, Bitcoin has fallen 25% per year since 2013.
Don’t get fancy. Stay humble, stack sats.
If you bought $50 worth of Bitcoin per week over the last 3 years, you would have personally invested $7,800, which is now worth over $37,000. That’s a 340% return.
Don’t try to time the market. Simply set up an automatic recurring purchase plan.
Should I wait for a dip?
According to a UBS Monthly Letter by Mark Haefele:
“An investor who invested $100 in the S&P 500 in 1960 and held onto their investment would now have $43,132.
“An investor who employed a “buy the dip” strategy of buying in 1960, selling at new ATHs and waiting for a 10% correction before buying back would have a portfolio worth just $534.”
Don’t try to time the perfect entry point. Simply buy a little bit each week and hold long-term.
Additional downsides of trying to “time the market”
You’ve probably heard the statistic that “only 10% of traders make money.” Well, that’s because trading is hard. Our human psychology betrays us as we succumb to fear and greed. Not to mention the whales and professionals have a huge advantage over retail investors.
Capital gains tax eats away at your returns. Every time you sell some Bitcoin, it’s a taxable event. Many people who traded the 2017 bull market ended up giving back much of their gains once the tax bill was due.
Staring at the Bitcoin chart and trying to decide when to buy and sell is stressful and time-consuming. Even a single error will ruin your potential returns for the year. And Bitcoin has a history of humbling even the best traders.
Alternatively, you can set up an automatic recurring purchase plan. Set it and forget it. Swan and chill.
Swan and Chill
Hopefully it’s obvious by now that the best way to invest in Bitcoin is an automatic recurring purchase plan. In fact, this is exactly why Swan was created in the first place.
Simply set up your Swan Bitcoin recurring purchase plan (e.g. $100/week) and we take care of the rest.
We automatically pull USD from your bank account, automatically buy Bitcoin, and you can automatically withdraw your Bitcoin (optional).
Swan offers the best platform for automatic “dollar-cost-averaging” in the industry.
- Easy to use – even grandparents love Swan
- Fastest onboarding time – 90% of new users complete signup in less than 10 minutes
- Low fees – 70% cheaper than Coinbase
- Great service – you can talk to a human at Swan
- Commitment to free Bitcoin education – free ebooks, podcasts, blog, YouTube channel
Rather than stress out about short-term price movements… automate your Bitcoin investing with Swan and just chill!