What is the best DCA strategy?

You asked, and I delivered!

Actually nobody asked, I was just curious for my own benefit and wanted to share.

Here is the setting: If you are getting paid monthly in fiat, you have a cash flow issue. You have the money to buy crypto once a month, and therefore you feel like you need to time the market. As we all know well, timing the market is fool's errand. That's why if you're in this game, you want to do DCA. So do you buy once a month, or do you divide your money and buy every week/day etc.? If you don't have automated means, daily DCA would be mighty annoying btw.

For this analysis, I used February - July 2021 BTC price action. The reason is; February is the onset of the bull run and June - July is a major pull back. Therefore, there are significant swings in price action that will make our point more clear. Daily average change was 3.3% in this period, compared to 2.5% during the same period last year.

BTC price action

Let's assume you'll able to put in $100 every month (in fact this doesn't matter if you have $10 or $10,000; it is just a multiplier). Total investment in 6 months will be $600 and we will look at monthly, weekly, daily, every other day, and every 3 days DCA strategies. First, let's look what happens if you started on Feb 6:

DCA starting on Feb 6

As you see above monthly DCA works best since you timed the onset of the bull run perfectly. You'd accumulate almost 6% more BTC in 6 months, compared to daily DCA.

https://preview.redd.it/sxfubufuxbf71.png?362&format=png&auto=webp&s=b4a432509f45dcb61258817b7868b9ac92baebf9

What if you started DCA a week later on Feb 13:

DCA starting on Feb 13

Now you see that everything is flipped and monthly DCA looks the worst, because your luck puts you at the down swings of the peaks. You'd accumulate 2% less BTC compared to the daily DCA.

https://preview.redd.it/t36asybrxbf71.png?362&format=png&auto=webp&s=34970318e9f3a61081a3b5965ea95f6fbbb01224

Moral of the story is your BTC accumulation swings 8% in 6 months because you entered the market a mere 7 days late. That's too much uncertainty for my taste. Weekly DCA is consistently better than daily and more stable than monthly. Also, daily DCA is just too much effort if you ask me, and there's no discernable difference between daily, every other day and every 3 days strategies.

Also keep in mind that DCA is a longer term strategy. You better be prepared to do it for longer than 6 months. My goal here was not to suggest a 6 months DCA, but to show even in 6 months it will be beneficial to do so.

One parting thought: If you had the $600 upfront, you'd have 0.01528 BTC when you buy on Feb 6, and 0.012737 BTC when you buy on Feb 13.

Now, off you go DCA.