Foreign media commentators argue that directly applying traditional stock and bond dollar-cost averaging (DCA) methods to Bitcoin may not effectively control drawdowns. The article suggests that Bitcoin's price is heavily influenced by halvings, leverage, and institutional adoption, making its price movement more akin to a cyclical asset. Therefore, advisors should focus on the current stage of a Bitcoin ETF rather than mechanically buying indefinitely.
The article's core message is a critique of the dollar-cost averaging (DCA) framework.
The article states that dollar-cost averaging (DCA) is common in stocks and bonds because these assets exhibit a relatively stable upward trend over the long term, and buying in batches can smooth out fluctuations and reduce the pressure of market timing. However, Bitcoin has experienced significant rallies followed by deep pullbacks in several complete cycles in the past, and simply extending the purchase period cannot significantly reduce paper losses during bear markets.
The article cites historical data, stating that Bitcoin has completed four relatively complete cycles since 2011, typically revolving around halvings: a decrease in new supply, increased demand, rapid price increases, accumulation of systemic leverage, followed by a pullback. The author notes that long-term holders have historically experienced drawdowns exceeding 70%, with the largest drawdown reaching 80% from peak to trough.
The author advocates adjusting positions periodically.
The article argues that Bitcoin typically enters a clearly defined bull or bear market phase within 12 to 18 months, and this state is not entirely random. The judgment can be based on data such as price trends, momentum, and on-chain cost base. The author's institution states that their research tracks 10 independent signals to identify the current market phase.
According to the article, when most signals turn positive, Bitcoin's average monthly return can reach 25%; when most signals weaken, the average monthly performance declines significantly. Based on this, the author argues that wealth management institutions should treat Bitcoin as a dynamically allocated asset in their portfolios, rather than holding it as a fixed percentage for the long term.
- The article cites an example of how advisors can set a maximum limit on Bitcoin configurations.
- However, the actual investment ratio can be adjusted between 0%, 50%, and 100% depending on the cycle.
- Relevant decisions can be based on rule-based signals, rather than subjective judgments made on the spot.
The key is to minimize large pullbacks.
The article states that cycle-aware strategies may not outperform buy-and-hold in every phase, but their advantage lies in minimizing concentrated periods of monthly Bitcoin declines of 20%, 30%, or even 40%. The authors cite backtesting data showing that this approach has achieved a higher Sharpe ratio than simply holding over the past 15 years, while reducing the maximum drawdown from 80% to 44%.
The article argues that this is particularly important for wealth management institutions that need to comply with fiduciary responsibilities and risk control requirements. Its conclusion is that Bitcoin can still be part of a decentralized portfolio, but the allocation should reflect its highly volatile and cyclical asset characteristics.
Additional information:The article also includes other advisory perspectives, discussing blockchain value capture, Ethereum's potential role as collateralized assets, and the possibilities of combining AI with crypto infrastructure. However, the main focus remains on Bitcoin ETF allocation methods and whether cyclical signals should replace mechanical dollar-cost averaging.
