Can the DCA Strategy Generate Profits in a Bull Market?

Original Title: "Can You Make Money with the Dumbbell Strategy in This Bull Market?"

Original Authors: Viee, Biteye

Can You Make Money with the Dumbbell Strategy in This Bull Market?

Today, I will share with you a strategy that can help you earn a lot of money while avoiding total loss: the Dumbbell Strategy.

We have analyzed the performance of the following crypto assets based on indicators:

· BTC, the Eternal King: BTC.D Index

· ETH lagging behind BTC in this stage: ETH/BTC Exchange Rate

· Overall weakness in altcoins: (1) Altseason Index (2) Altcoin Market Cap

· Meme coins with high risk and high returns, outperforming BTC, ETH: Memecoin Index

01 What Is the Dumbbell Strategy?

The Dumbbell Strategy, mentioned by Taleb in "Antifragile," involves adopting a conservative strategy in one area and an open strategy in another, abandoning the middle ground. In simple terms, it is "mostly conservative, partially aggressive."

When applied to the crypto world, most of the assets can be invested in secure assets like BTC and ETH, with a small portion of funds allocated to high-risk assets like Meme coins, minimizing participation in most mid-tier altcoins.

This approach allows for preserving stability in the highly volatile crypto market while also providing an opportunity to achieve high returns through high-risk assets (such as Meme coins).

Next, let's objectively examine the performance of BTC, ETH, most altcoins, and Meme coins through some indicators.

02 BTC, the Eternal King: Referencing BTC.D Index (Bitcoin Dominance)

The Bitcoin dominance index is used to reflect Bitcoin's market cap dominance and is often used to determine the start of altcoin seasons. From the chart, we can see that during the last bull market in 2021, when the altcoin season started, the BTC.D index was significantly declining.

The rationale behind this is: a decrease in the BTC.D index leads to a decline in Bitcoin's dominance, increased risk, altcoins reclaiming market share, and altcoins starting to surge (and vice versa).

We are currently in the Bitcoin Season, with the index having been rising since the beginning of the year, up 56% as of July 26. Altcoins have not outperformed Bitcoin, so Bitcoin remains dominant.

03 ETH Lags Behind BTC in This Stage: Referencing ETH/BTC Exchange Rate

Usually, the larger the ETH/BTC exchange rate, the smaller the price difference between the two, indicating a strong performance by ETH. Conversely, a smaller ratio means a larger price difference, suggesting a relatively weak performance by ETH.

Additionally, this indicator is also used to assess the market's interest in altcoins. If this ratio starts outperforming BTC, it could be a sign of funds flowing into altcoins.

Currently, the ETH/BTC exchange rate is still relatively low, indicating a weak performance by ETH. Even the approval of an ETF has not been able to reverse Ethereum's fortunes. However, due to its low position, if you are confident in ETH, you may consider gradually building a position and waiting for a subsequent rise.

04 Overall Weakness in Altcoins: Referring to (1) Altseason Index

The Altseason Index tracks the sentiment in the altcoin market, calculating the proportion of the top 50 altcoins outperforming Bitcoin over a period of time. An index greater than 75 indicates altcoin season, while less than 25 indicates Bitcoin season.

It is clear that we are currently in the Bitcoin season, with the index at 16 and weak altcoin momentum. Since the beginning of this year, the index has only been above 75 at the end of January, lasting only half a month. Compared to the three-month period from the end of March to the end of June 2021, where the index remained above 75, this season cannot be considered a true altcoin season.

05 Overall Weakness in Altcoins: Referring to (2) Altcoin Market Cap

This index, in full, is Crypto Total Market Cap Excluding BTC & ETH, which reflects the total market value of cryptocurrencies other than BTC and ETH, indicating the overall flow of funds into the altcoin market.

After a significant increase in the altcoin total market cap at the beginning of the year, the trend did not continue, fluctuating repeatedly in recent months during this choppy market. There is currently no clear breakout signal, indicating an overall weakness in altcoins.

06 Meme Coins: High-Risk, High-Reward, Outperforming BTC, ETH: Referencing Memecoin Index

The Meme Coin Index launched by MarketVector tracks the performance of the top 6 meme tokens by market capitalization.

The main components include $DOGE, $SHIB, $PEPE, $FLOKI, $WIF, and $BONK, representing the overall performance of meme coins.

A comparison shows that meme coins have performed remarkably well from the beginning of the year, with a 120% increase, surpassing BTC with a 52% increase and ETH with a 37% increase.

07 Summary & Risk Warning

Combining the dumbbell strategy, from the above indicators, it can be seen that under the current market conditions, BTC and ETH are indeed deserving safe assets with high market dominance.

Especially BTC, even stronger than ETH. A comparison of returns shows that meme coins still represent high-risk, high-return assets. Looking at most altcoins, overall they are relatively lackluster with not many opportunities; it's okay to allocate fewer chips to them.

Here, a risk warning is also needed. Cryptocurrency allocation is a very challenging matter and cannot be simply done with a few indicators.

But regardless, always remember, only when most of your funds are very safe, is taking risks meaningful. Those who have experienced multiple bull and bear cycles will surely resonate with this! As the saying goes, as long as the green hills remain, there will be no shortage of firewood to burn.

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