Why Bitcoin Dollar Cost Averaging May Be the Best Option in Today’s Market

by James · November 25, 2022

Bitcoin has been falling continuously for the past couple of weeks, mainly due to the FTX crash
Institutional investors such as Purpose Bitcoin ETF Holdings have yet to buy back despite the discount.

The recent Bitcoin (BTC) crash has done more harm than good to investor sentiment. Those who have been watching the market closely may have observed that investors are quite shy about buying back.

If you find yourself in the same boat, here are some considerations that may help you gain a better understanding of the current situation.

The price of Bitcoin has been falling continuously for the past couple of weeks, mainly due to the FTX crash. Reports of an FTX hacker followed soon after. BTC has barely had enough time for a significant recovery, and its recent performance is a ghost of its former, highly volatile self. The price is not the only thing that has been affected.

Investor sentiment also took a massive hit, dampening Bitcoin’s ability to recover. Investors are afraid to buy back only for the price to fall lower. In addition, most buyers are still on the sidelines due to fear of risk after FTX. Institutional demand is a segment that has taken a big hit.

Purpose Bitcoin ETF Holdings

Source: Glassnode

Institutional investors such as Purpose Bitcoin ETF Holdings have yet to buy back despite the discount. This is confirmation that investors are waiting to see if the market will recover.

The lack of significant demand is evident in the low execution of leveraged positions following the recent crash. This is observed in Bitcoin futures estimated leverage ratio, which fell significantly this week.

Bitcoin futures estimated leverage ratio

Why Dollar Cost Averaging Makes the Most Sense for Bitcoin

Many investors are still afraid to buy into BTC, especially now. This has affected its ability to bounce back. However, that does not mean that the current market situation is a bad time to buy.

The market may gradually recover, and those waiting for an opportunity to buy the bottom will have lost an opportunity. On the other hand, it could still go down further.

Timing the market is quite difficult, especially in the current market conditions. The best strategy would therefore be to average the dollar cost for each case.

Following the footprints of whales can also be a useful strategy. For example, BTC has seen some relief from the bears over the past two days. It is no coincidence that whales have gathered during the same time, thus contributing to the recent upswing.

Bitcoin addresses with over 1000 BTC

Well, Bitcoin is greatly reduced from its current high, which means that the current price level is ideal for market entry. However, there is still a risk of more downside, but then BTC has a history of unexpected rallies. In any case, a dollar cost averaging strategy is the best option for long-term investors.

This article first appeared on AMBCrypto