📈 The Best Bitcoin DCA in 2024

A few weeks ago I showed you the best way to take profits from your Bitcoin position.

In that analysis, I covered a product called AlphaSquared - and I've gotten a lot of questions.

So here's a full overview of the product and what I use it for.

What Does AlphaSquared Do?

AlphaSquared was created to help you get the most out of your dollar cost averaging (DCA).

If you know anything about investing, you understand that DCA is the most stable and conservative approach.

If you want to learn more about DCA you can pick up almost any finance non-fiction book. Two of my favorites are A Random Walk Down Wall Street and I Will Teach You To Be Rich.

The core problem to solve is: how can I get more out of my DCA?

If I invest 10% of my paycheck into Bitcoin, how can I get more Bitcoin for the same amount invested?

Measuring Risk

Traditional DCA has you investing the same amount all the time.

This is good because, over long periods, you get exposure at many different prices.

But it's bad because when prices are high you're buying the same amount as when prices are low.

It would be better to buy more when prices are low and buy less or even sell when prices are high.

To solve this problem we can create an augmented DCA.

By simply taking into account the fear and greed index or Bitcoin's MVRV ratio we end up with a lot more Bitcoin for the same dollars invested.

The problem with this simple augmented DCA is there's no guarantee that the fear and greed index or the MVRV ratio (or any single indicator) will continue to predict Bitcoin price.

This is where AlphaSquared comes in with their core offering - the risk number.

This number is a proprietary blend of over 5000 Bitcoin market data points.

You can see on the right side of the screen in the Risk-Price Matrix how different prices would reflect the current risk number.

Note: the Risk-Price Matrix changes over time in response to current market dynamics. You can learn more about this calculation on the AlphaSquared website

This solves a few different problems with traditional and augmented DCA.

1. We don't have to buy the same amount because we have more information
2. We're no longer dependent on single data points
3. The weights of the indicator can change over time and respond to market dynamics

Of course, this approach still has risks, which we'll cover later on.

In addition to providing this risk indicator, AlphaSquared also sends notifications via email to help keep you informed of the market's current state.

Does the Risk Number Work?

AlphaSquared knows there's no one-size-fits-all solution for everyone's investing preferences.

To fit their solution specifically to your investing style they've come up with a strategy builder.

The strategy builder allows you to use preset strategies based on the risk number to match your investing preferences.

Or you can define your own totally custom strategy and run tests to see how it would perform over different time periods.

You can use the same testing module to consider different future price scenarios and understand how your strategy would perform under different market dynamics.

Combining the risk number with the strategy builder should give you all the tools you need to create your own custom DCA that aligns with your risk preferences.

The Risks

As with any financial product or trading strategy, there are risks that you need to be aware of.

AlphaSquared's strategies are not personalized recommendations. They are tools to help you make your own informed decisions.

Particularly with the forward testing, these are just projections of what could happen in the future, not what will happen in the future.

If Bitcoin gets hacked and fails tomorrow (unlikely) obviously none of this will be valid or helpful.

On top of that, the introduction of spot ETFs has meaningfully changed the market dynamics of Bitcoin.

While the AlphaSquared indicator is more robust than relying on something like the fear and greed index, no indicator is perfect.

That being said, this is how I am using the AlphaSquared indicator.

AlphaSquared Automation

I don't like having to take manual actions when it comes to my finances.

I want set-it-and-forget-it strategies that I can check in on once in a while when I have time.

I've already automated my Bitcoin purchases using the Coinbase API, and now I want to include this AlphaSquared risk number.

Luckily, AlphaSquared supports this via their API.

On the AlphaSquared website navigate to Member Area -> User Dashboard -> API to collect your API key.

Using their API you can retrieve the risk number as JSON into your applications

Sample Request:

curl -H "Authorization: {YOUR_API_KEY}" https://alphasquared.io/wp-json/as/v1/latest-risk-value

Sample Response:

{"latest_risk_value":"58.30"}

Full API Documentation is available here

Incorporating this risk value as a standalone Python method would look something like this:

import requests

def get_alphasquared_risk_value():
	API_KEY = "{YOUR_ALPHASQUARED_API_KEY}"
	url = "https://alphasquared.io/wp-json/as/v1/latest-risk-value"
	
	response = requests.get(url, headers={"Authorization": API_KEY})
	
	if response.ok:
		data = response.json()
		latest_risk_value = float(data['latest_risk_value'])
	else:
		print(f"Error {response.status_code}")
		latest_risk_value = None
	return latest_risk_value

To learn more about AlphaSquared, check out their website here.

AlphaSquared is completely free to use for the first two weeks - you only need an email address.

If you're happy with the product, you can use the code "LEVELUP" to get 15% off any of the paid plans.

I look forward to fully integrating the AlphaSquared indicator in the Coinbase Advanced Trade wrapper soon.

I'll release a full tutorial on the blog and YouTube when it's ready.

DM me on Twitter or join the Discord if you have any questions.

See you guys next week.