The Data PROVES This Simple Bitcoin Strategy Beats Blind DCA by 471%

[00:00:00]Wouldn't it be great if we could just buy the exact lows of the Bitcoin bear markets and sell the exact peaks? Why don't we just use the cycle master chart and time the cycles perfectly? Well, one, I'd be out of a job, but secondly, sometimes it doesn't quite play out like that. Unfortunately, there is no holy grail indicator for Bitcoin or any other asset, and unfortunately, there never will be. Because if we look at the most recent bull cycle, we didn't reach this upper overvalued level at around $200,000. We didn't get a perfect sell opportunity. And for all we know, we might not hit the cycle lows valuation on this chart, meaning we're not going to get the perfect Bitcoin buy entry.

[00:00:40]So, what we're going to do this video, it's almost a follow-on of this video that we released last week, mathematically modeling the future of Bitcoin, which in itself was actually a second part to the video released a few days before that. So, essentially, this is a part three video.

[00:00:56]And it's great because again, one of you lovely audience members came up with this idea because it saves me the hassle of having to come up with video ideas, but it also lets me know what content you guys want to see. So, this is from Richard. I don't think I'm doxing any of your information in this, but he referenced a video from Ben Cowen, good friend, great content creator, looking at how we can really quantify accumulating Bitcoin because again, we can look to metrics like the cycle master, which have worked great. We can look to a plethora of different dates, points, and metrics and get paralysis by analysis, and realize that going all in at the lows is pretty tough. Going all out at the highs probably even tougher.

[00:01:36]We need to dollar cost average in, which is a lot a lot of people are dollar cost averaging in, but a lot of people are just blind dollar cost averaging in.

[00:01:45]They're buying every single week, every single month, whenever they get their paycheck, and you know, that's fine.

[00:01:50]Reduces the stress, but we can do better than that. Within Richard's email, it says, "Matt's been very publicly accumulating towards these lows. How does he do it?

[00:01:59]Well, we'll see if it is actually the lows so to see if I can gloat in a few months time, but I strategically dollar cost average in. And what we're using is like I said, the these bands, these quantile bands from the previous MVRV mathematically modeling Bitcoin video.

[00:02:15]Because what we can see is when we divide Bitcoin into these quantile bands, these percentiles of 5% lows, 5% highs. Where is Bitcoin's relative valuation in relation to where we'd expect it to be based on that amplitude decay model we built for the MVRV. Sounds very complicated. If you go watch the previous video, it's honestly not that complicated. But again, I wanted to quantify how you can actually use that type of data to outperform because it's great seeing, yeah, you know, it it peaks at this line, it bottoms at this line, but sometimes it doesn't actually reach those lines. How how do I actually use this? How how do I make this actionable?

[00:02:57]So, what I did, a lot of data analysis.

[00:03:00]You know me.

[00:03:01]Well, we've got and I've already kind of given away what we're going into, but we're looking at using this data to actively accumulate Bitcoin. Now, what we're looking at here is a starting capital of $100 and a weekly deposit of $10. This is just a blanket example of how we're actually going to use this, but what we can see, I wanted to make this incredibly simple, but I also wanted to make sure it was accurate. So, I actually have the data somewhere looking at how accurate this was and we can see this outperformed blind dollar cost averaging in 88% of the time.

[00:03:36]Claude may have helped me calculate that. So, you can pick any day throughout the history of Bitcoin, apply this exact methodology, and there's a 90% chance it's going to outperform blind DCA. I mean, right now this is just accumulating Bitcoin. So, what these blue bars are representing is we can see. It's currently at about 1.424344 around that because we're depositing $10 every single week to accumulate more Bitcoin. So, when we're in the bottom 70th percentile, which means we're just not in the upper 30th band. So, the top six bands we're not buying. You can just vaguely see it's this slightly thicker gray line. Do not buy Bitcoin when we're above that level.

[00:04:18]About third of all of Bitcoin's price action will be We do not want to buy that. Clearly, we're overvalued. Beneath that, dollar cost averaging, whether it's every day, whether it's every week, just chill. No stress.

[00:04:32]However, we're going to do a little bit more than that because any period of time in which we are above in this top 30% we're putting that into a cash reserve.

[00:04:42]We're leaving that capital spare. So, when we get into the bottom 15% we can buy a little bit more aggressively. This is where these blue lines are getting a little bit high. This indicates we're accumulating more Bitcoin. Now, you'll see it initially spikes up when we first start going low, but it spikes higher because this is also a almost aggressive linear model of accumulation. So, we're not just buying more when we're in this bottom 15% again. We can see this slightly thicker gray line here indicating that Bitcoin is clearly at a discount and undervalued at these levels. But, with every percentage lower within this quantile methodology, we're buying slightly more Bitcoin. So, when we're in this bottom almost never-before-seen levels of undervaluation and discounted BTC, that's when we're going very, very aggressively. And we can see that represented in these blue lines.

[00:05:33]Now again, this is just looking from 2014 the data. You can use 90% of Bitcoin's history and we'll we'll do a little bit of testing of that later on.

[00:05:42]But, once we get into this upper 30% the top 30% of data readings, we're just not buying. Simple as. Accumulating more aggressively at the lows, not buying at the highs. Accumulating more aggressively at the lows, not buying at the highs. Very, very simple.

[00:05:59]But this is just dollar cost averaging in. We can see the outperformance isn't massive. It's actually slightly out of your view. I'll do that. We can see we only outperformed blind dollar cost averaging in by about 5%. So, is it really worth the hassle? I mean, there's not going to be any extra incurred fees or taxes because ultimately it's the same amount of deployed capital. It's just slightly more strategically buying when we have more favorable conditions. But keep in mind, we didn't have much opportunity to actually bank spare capital in these early cycles. So, what we can do is if we just change this to say a year earlier to 2013. Or in fact, because this was at the highs 2014, we'll go a year later because it's going to be hard to beat dollar cost averaging in at a cycle low, surely. So, we change this to January 2015, we can see we still outperformed blind dollar cost averaging in.

[00:06:49]And that's very difficult to do when we're starting at pretty much the exact low of a bear market.

[00:06:55]But we're going to take it one step further. I I kind of gave it away previously, but we are taking it one step further because if we introduce a sell mode, so kind of the similar that the same logic is accumulating more aggressively at the lows by taking the bottom three bands here, the bottom 15th percentile, if we flip that. So, in the top 15th percentile, the 85th and above, again, we can see the slightly thicker gray line. When we're in this level, it's the exact same entry logic but flipped for exit logic. We're going to start selling 2% every single day, but it's going to grow linearly. So, once we start getting to this very upper echelon, we're going to scale out more aggressively. Now, what I can do is rather than just looking at the buy size here, might be a little bit easier to see if we go to allocation. Because when what we'll see is if I add sell mode, you'll see the percentage of your portfolio held in Bitcoin or US dollars. Now again, this is twofold because there's times where not only are you not going to be scaling in, so your USD reserve is going to be growing, but there's going to be times now where you're actively selling a couple percentage of your Bitcoin stack.

[00:07:59]Now again, what I can do is zoom out and we can see this orange and green line overlapping. Now this is from 2015 and we have a outperformance versus blind dollar cost averaging in of 400 and 54%.

[00:08:12]Now, I'll just take it back to 2014 once again. And I what what I also want to do is not only if you pick practically any random day out of the entire history of Bitcoin and you'll outperform.

[00:08:23]I really wanted to make sure this was a robust model that isn't over fitting. So what we can do, we can scroll through and see, yep, it's flipping to USD when we're overvalued, it's flipping to BTC when we're undervalued. But this is using the entire data series to actually formulate these bands.

[00:08:39]What we alter it. So rather than using all of the data, we actually just use say the 2023 data.

[00:08:49]So all the past three plus years of data don't even exist. Now the bands up here aren't going to change just yet. This is just the data down here. But what we can do is see that this is still outperforming over 300%. Change it to 2019.

[00:09:02]Still outperforming over 300%. 2015.

[00:09:06]We're limiting the data set so we only have from 2014 to 2015. The last 11 plus years of data do not exist. And we still outperformed blind dollar cost averaging in by over 200%.

[00:09:20]Clearly this approach is somehow robust.

[00:09:24]And what we can do, is if we change this to look at say the equity of this valuation versus blind dollar cost averaging in, it becomes a little bit more obvious because this P&L curve, this this blue and gray line, you can see this gray line is just dollar cost averaging in. It's just going to follow the price action of Bitcoin almost exactly. That's going to be slightly different because every week you're actually deploying more capital and you're buying every single day.

[00:09:49]But because at this peak you were scaling out of Bitcoin, this PNL curve not only produces more returns, but the drawdowns experienced are significantly less.

[00:10:00]And I think that's probably one of the biggest elements that many people overlook, especially when you're first getting into investing. You think, "Yeah, I I can stomach drawdown. What, 50, 60, 70%? That's that's fine. I know it's going to go back up." But until you're actually physically within that situation, it's very, very difficult to know how you're going to deal holding a bag that is deeply underwater and seeing red every single day. So, the fact that we're not only outperforming to the upside, but we're massively reducing that experienced drawdown, it's it's a double whammy.

[00:10:30]It's a massive outperformance. And if I just go to the the versus blind chart here, what we can see is throughout the history of Bitcoin, so that well, this is since 2014, we can see this is the just the relative outperformance. If I just add the label on here, we can see that currently this is a 5.71 times outperformance compared to blind dollar cost averaging in.

[00:10:54]This is just starting with $100 of capital and putting in a $10 a week. Again, we could change it, you could start on $1,000 and put in $250 a week. It doesn't really matter.

[00:11:03]What really matters is the percentages, the actual outperformance and and not just the monetary gains, but the the time saved and the simplicity and the stress reduction in just following a simplistic plan like this.

[00:11:20]Again, you can really see it's during these bear markets where we're massively outperforming because we're reducing our exposure to an asset that is experiencing massive drawdowns.

[00:11:30]But again, I wanted to prove that this isn't just overfitted to the current day. We can see we can limit the training set to to exclude the past 10 years of data and it still works.

[00:11:40]But, let's just go back to allocation here and we can see versus blind 471% outperformance. What if we change it to say 20 18, the start of 2018. I mean, we'll go to the the peak of the previous bull market, the worst possible time you really could have gone into Bitcoin. Well, let's just for simplicity say say January the 1st, 2022. So, right around here as the Bitcoin price is $50,000 just before a monumental horrible bear market. Still outperforming. What about at the exact bear market lows practically? 2023.

[00:12:19]Again, could not have got a better time to get into Bitcoin, still outperforming.

[00:12:27]And this is only, you know, the one.

[00:12:30]I'll be honest, this isn't my exact approach because I haven't managed to put my approach into a quantified methodology as simple as this yet, but that is the expectation and the plan in the very near future. This is just using the NVRV models, which, you know, on their own look great. Is it going to work 100% going forward? No. So, I'm going to reference a previous bit of content we put out looking at the quantile bands methodology, which is just applying kind of this 1 to 20 split into fifth percentile bands across many different metrics. And for this, we've just used the Mayer Multiple or the ratio between a moving average and the underlying price of Bitcoin on the one-year MA and this is rolling over a four-year basis.

[00:13:14]And again, if we could have applied such a methodology to this, again, we can clearly see we're aggressively accumulating as Bitcoin is at the lowest, potentially even under these bands.

[00:13:25]And we're to out towards bull market peaks.

[00:13:29]Purely just based on one moving average.

[00:13:31]Add in on-chain data, add in the production cost fundamentals where we can aggressively accumulate as Bitcoin is getting towards the cost it actually costs to mine a Bitcoin.

[00:13:44]But hopefully this was a good introductory approach to to see what what can really be done. And one thing that is, you know, again really outlining why why we've taken the stance at BM Pro is the allocation we've got to Bitcoin has recently crossed above that USD. We are aggressively accumulating Bitcoin at these levels, not because it cannot go lower, but because the data proves that compared to blind dollar cost averaging in, which is very difficult, or lump sum investing, which one negates the future capital and allocation that you could put into Bitcoin exposure because, you know, we we get paid every week or every month, but the stress involved with trying to time the market, again, there's there's going to be people that are going to claim I'm going to go all in at this price on this date. Some might nail it, some might not. The chances of doing that are incredibly low.

[00:14:36]And you have to take into consideration some people might not want to ever completely remove their Bitcoin allocation. So if I just add this back on, what we can even do is at the bottom here we have a holding floor.

[00:14:47]So let's say we always wanted to keep some Bitcoin to hand. Well, what this model will do is actually scale down the the selling to ensure that you're always aiming to hold at least 50% of your capital in Bitcoin.

[00:15:01]What we can do is if we do this approach, again, we can see that the outperformance is still 256% compared to blind dollar cost averaging in. And you can see this Bitcoin allocation is just growing exponentially from when we first dropped down to $20,000 to when the bull market finally kicks off. The USD allocation goes from all the way up here at around 65% down to when the bull market is really starting to practically 0%. Similar situation in the previous bull market. We can see here Bitcoin allocation got down actually to 33% ramps up to 100% just around the lows as the USD allocation does the complete offset.

[00:15:39]What we're wanting to do is make Bitcoin Magazine Pro not just the number one source for data and analytics and you know, interesting talking points.

[00:15:51]The emphasis over the next few weeks and months is going to be making the data entirely actionable to leave very little second-guessing on the on the table to you know, remove the vagueness and and opaqueness that a lot of analysts and investors will will really do. And of course, we've been guilty of that in the past, but if we can make actionable methodologies like this that you can simply follow along with that you can you know, remove all of that uncertainty and paralysis by analysis and it probably with the data outperform.

[00:16:29]Now of course, there's there's taxes to take into consideration and fees etc. But you don't even have to sell your Bitcoin. You can make sure you're never going below your floor of Bitcoin.

[00:16:37]Whatever approach you want to take, we're going to try and accommodate that and not just with speculation and you know, male astrology, but backed up by genuine data and genuine facts. So, I hope you enjoyed this video.

[00:16:53]If it's slightly outdated, I do apologize. This is being filmed slightly in advance because I I don't even know the result of the England-Argentina game, but I'm assuming England have won the World Cup.

[00:17:06]So, I'm out celebrating. So, I've got a week off.

[00:17:09]I also need to repair my broken leg, potentially broken other leg in celebrating that monumental victory against Spain in the final as Harry Kane scored a hat-trick to win the game.

[00:17:19]But, I hope you enjoyed this content and I hope you enjoy the kind of direction we're wanting to take and you know, how we're steering content creation and and and what we're providing at BMPro to again try and not just be the number one source of Bitcoin analysis and information, but to be your your number one stop for all actionable BTC data.

[00:17:40]And as we can clearly see, it saves me a job coming up with content ideas. If you guys let us know what you want to see.

[00:17:46]So, as always let me know in the comments below and on social media if you like this video and what you'd like to see going forward. Thank you all very much for watching and I'll see you in the next one.

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