Making the case for long-term crypto investing

Back-tests show buying Bitcoin when the Fear and Greed Index as at ‘extreme fear’ is a viable long-term strategy.
Image: Brent Lewin/Bloomberg

The month of May has been a heavy one for crypto holders left nursing the wounds of the collapse of the stablecoin TerraUSD (UST) and the contagion effect this has had on crypto prices across the board.

Bitcoin dropped to a low of $26 782 before recovering some of its losses. Some analysts are predicting it may go even lower before we see a recovery.

The Fear and Greed Index has been stuck at ‘extreme fear’ for much of May, and nothing seems to shake it from its torpor.

Here are a few interesting metrics to consider when planning a long-term investment strategy.

Dollar-cost averaging is a proven and viable investment strategy

Those adopting a dollar-cost averaging (DCA) strategy purchase a regular amount of BTC at the same time each month, regardless of the price. Had you invested $10 a month into Bitcoin (BTC) starting in May 2019, your percentage gain would be 176%.


Buying when the market screams ‘extreme fear’

While DCA’ing has been proven to deliver strong returns, DCA’ing into BTC when Fear and Greed is at ‘extreme fear’ has been shown to improve returns by over 80% over the last four years. The index has spent much of May at ‘extreme fear’ and various studies have shown that buying when the index is this low increases long-term returns.

The index ranges from 1 to 100, with 1 being the lowest (most pessimistic) and 100 being the most optimistic – when greed is at a maximum.

An analysis by Jarvis Labs suggests readings below 10 are extremely rare, with 20-30 being far more common.

That means we are currently in unusually pessimistic territory, which history suggests is a good buying opportunity.

Another study by crypto investment platform Revix proved that buying BTC whenever the index fell below 15 (as it is now) improved the dollar-cost averaging returns by a further 80%.

“This makes sense,” says Revix head of investments Brett Hope Robertson. “The Fear and Greed Index, when it is as low as it is now, allows you to fine-tune your timing to achieve higher returns over the longer term. Buying when the Fear and Greed (F&G) Index is below 15 has historically been extremely workable as an investment strategy. It is also easy to understand and apply to timing your purchases of BTC.

“Many crypto investors tend to jump on board when prices are moving up, but the data shows that you are better off in the long term by dollar-cost averaging, and using the F&G Index when it is below 15 to fine-tune the timing of your purchases – there’s a reason contrarian investors are the best around.”

And where BTC goes, so goes the rest of the market. Altcoins such as Ethereum (ETH), Polkadot (DOT) and Solana (SOL) take their lead from BTC. A rebound in BTC will lift the rest of the crypto market with it.

Prices may drop lower from these levels, but the historical data suggests the BTC price and the F&G Index will recover above current levels.

Despite the price drop, whales are accumulating

Data from Glassnode suggests whales are using the recent price drop to accumulate. The number of Bitcoin addresses holding 100 to 1 000 BTC continues to grow despite the weaker market, according to on-chain intelligence firm Santiment. This metric has historically had a close correlation to the BTC price – as whales continue to accumulate, price tends to rise.

Source: Glassnode

Bitcoin’s logarithmic chart is at lows rarely seen since 2012

A logarithmic chart redraws the typical linear chart so that increases in price are visually smaller at the upper end of the scale. This is shown in the BTC chart below. What’s important to note about the chart is that BTC is currently at the lower extremity of the growth curve, represented by the yellow lines. Historically, when BTC has gone to these lows, it coincided with a cycle low, and generational buying opportunities have presented themselves.

Buying BTC below its cost of production is a proven investment strategy

Cointelegraph points out that many traders buy BTC when it trades below its cost of production, currently sitting at $27 644. The current price is about $3 000 above that. Any drop below $27 644 will likely trigger buying – and history is on the side of those pursuing this strategy, as the graph below shows. Historically, the BTC price does not move much below its costs of production before commencing a recovery – and we are near that point.

Source: MacroMicro

“Rather than shying away from this market, there are multiple metrics and reasons to be buying,” says Hope Robertson. “Investors have been inundated with negative news since the collapse of TerraUSD, and that dragged the rest of the crypto market down with it. But I think the analysis shows there are many metrics that are now beginning to suggest buying opportunities.”

Invest in Bitcoin, fee-free

Revix, a Cape Town-based crypto investment platform, is running a promotion designed to kickstart your crypto investment journey. Now you can invest fee-free in the original and crown cryptocurrency — Bitcoin! Between May 22 and June 21 2022, Revix users get zero buy-in fees on Bitcoin. This is your opportunity to add your name to the Bitcoin story. And if the plot so far is anything to go by, it’s one you really want to be part of.

About Revix

Revix brings simplicity, trust and excellent customer service to investing in cryptocurrencies. Its easy-to-use online platform enables you to securely own the world’s top cryptocurrencies in just a few clicks. Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.

Remember, cryptocurrencies are high-risk investments. You should not invest more than you can afford to lose, and before investing, please take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

This article is intended for informational purposes only. The views expressed are opinions, not facts, and should not be construed as investment advice or recommendations. This article is not an offer, nor the solicitation of an offer, to buy or sell any cryptocurrency.

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