DCA Exit Strategy

2021 Bull Flash

Bitcoin has been stuck in a 4-year loop based on miner "halving" cycles. (Every 4 years, the BTC network reduces the amount of rewards for miners, and this historically leads to a price spike 18 months later.)

2021 has been a slightly irregular year compared to past cycles. It rose really fast, and then crashed dramatically, enough to scare a lot of people. But now it's back. If history ends up rhyming again, it's looking like BTC could land somewhere between $100k - $250k by the end of this year. Sounds like a moonshot, but it's only 1-5x away. After Thanksgiving of 2017, it shot up 5x in one month. Given the new scale of institutional investors, this seems possible again (though, this can't keep happening forever).

These spikes aren't sustainable. If we hit $250k, there will be many saying "this time it's different, straight to a million!" It won't, it will crash down, perhaps below $100,00. From this, others will yell, "it's finally over for good this time!" It's not, it could go sideways for a few years before slowly climbing again.


Mayer Multiple

$50,000 might seem like inflated BTC, but according to the Mayer Multiple (200-day moving average), it's under-priced. The current multiple is 1.06. (8/23/2021). Historically, only when the multiple crosses 2.4, does it signal an over-extension and an impending crash. 1.06 is even below 1.44, the historical average, meaning there is lots of room for growth in this cycle.


$200k BTC, Then What?

If you own any Bitcoin, the idea of it hitting $200,000 is both an exciting and stressful situation. What do you do in that situation? Do you sell all of it? Some of it? Nothing?

Selling 100% of your Bitcoin in December of 2017 might have been smart. But if you didn't buy back during the bear market, then you missed out on 250% of price appreciation. If you follow the HODL bandwagon, and the market naturally crashes, you'll be kicking yourself.

If you think BTC is a bad experiment, and will never hit $200,000 again, then selling it all in a peak frenzy is easy. But if you believe that there could be another market cycle, then it's harder. I'm open minded to the idea of Bitcoin hitting a million dollars. (I'm also open to the idea, that after it does, it could slowly retreat to $0 over the next ten years.)

My DCA Exit Strategy accounts for the possibility that the crypto markets may grow 20x the size of today's size. (That's around a 40 trillion overall market cap. Absurd, but possible.)

DCA Exit Strategy

"Dollar cost averaging" is a strategy for getting money into Bitcoin, regardless of the price, you put in $X every month. This means some months will be good investments and some bad, but done over enough time, you'll accumulate the average of your entry points.

My thought is to apply a somewhat similar strategy for exiting.

There are a few ways you could do it, but my approach (at least for the moment) is to take out specific percents of holdings at pre-defined targets. There is no knowing when the targets will be hit (this cycle or next-cycle). But when a target is hit, I can act methodically, without emotion.

Here's an example:


The idea is to take a little bit of profit as you go, and never completely exit until it hits an absurdly high price. (Also, at that point, you have the option to keep all your holdings in BTC, and never convert back into USD.) If you follow this, by the time you hit the end, you'll have lost ~60% of your potential value, as opposed to HODLing until a million. But if you think $200k is the top, and sell everything, then you might lose out on 5x of what you exited with.


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