Dollar-cost averaging (DCA) calculator for Bitcoin (BTC) backtesting
Visualise and calculate historical returns of investing $100 in BTC every 7 days from Dec 2022 until now
Value in FIAT
in 3 months
BTC selling price
1st order $16,821.13
Over 13 instalments of $100, every 7 days
Earnings over time
Estimate the development of your earnings over time
BTC price over time
Price development vs. average cost
Profit/Loss every 7 days
Based on your purchase interval you would make profit 85% of the time
What is Bitcoin?
Bitcoin (BTC) is the first successful decentralized cryptocurrency. It uses peer-to-peer technology to operate without the need for a central authority behind it. Bitcoin transactions are registered on open-source software. Bitcoin uses blockchain technology to ensure transactions are secure and censorship-resistance. A blockchain is a distributed ledger, or a shared database that, in BTC’s case, anyone can access to verify transactions. While anyone can access these transactions, Bitcoin works through pseudonymous addresses. This means that while anyone can see the transaction occurred – meaning address A sent BTC to address B – often only the sender and receiver know who’s behind each address. Blockchains are essentially built through blocks of data chained together – forming a chain of blocks – with each new block building on the previous one. Transactions are verified by validators, which on the Bitcoin network are called miners. These use specialized hardware to “mine” blocks and add them to the blockchain by solving complex mathematical problems. Miners are rewarded through a set BTC reward included in each block, called the coinbase reward, and with the transaction fees attached to the transactions included in the blocks they mine. Data stored in blocks is encrypted through Bitcoin’s SHA-256 hashing algorithm. Bitcoin’s supply is limited to 21 million coins, and each block is added to the network every 10 minutes. The timing of each block is kept stable through a difficulty adjustment mechanism, while BTC’s inflation is controlled by code, with the reward in each block halving every 210,000, or roughly every four years. Each Bitcoin is divisible to eight decimal places, with the smallest unit being known as a satoshi – one satoshi is 0.00000001 BTC. The cryptocurrency could be made divisible into even more decimal places in the future.
Who Created Bitcoin?
Bitcoin was created by Satoshi Nakamoto, a pseudonymous entity who built upon previous work to outline the technology behind the cryptocurrency in a 2008 white paper titled: "Bitcoin: A Peer-to-Peer Electronic Cash System.” It’s known that Nakamoto registered the Bitcoin.org domain in August 2008, before announcing the whitepaper to a Cryptography Mailing List in October of that year. Bitcoin’s first block – the genesis block – was mined on January 3, 2009. Nakamoto added to it the text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” as a reference to the 2008 financial crisis and central banks’ response to it. The first Bitcoin transaction was made on January 12, involving Nakamoto and Hal Finney, a cypherpunk that worked with the PGP Corporation developing a leading encryption product.
How Do You Use Bitcoin?
Bitcoin was initially designed as a peer-to-peer payment method. As interest around it grew and its value increased, its use cases grew as well. Because of Bitcoin’s open-source approach, competition from other cryptocurrencies grew as well. To use Bitcoin, a wallet is necessary. Bitcoin wallets work as digital “bank accounts” that can only be controlled by the entity behind them. When a wallet is created, two keys are generated: a public and a private key.
- Public keys are addresses used to send and receive payments. They’re akin to a bank account number.
- Private keys are akin to the password protecting a bank account, and anyone who controls the private key to a wallet controls the wallet. As there is no central authority on the Bitcoin network, if a private key is lost, the coins on that wallet are lost.
Bitcoin is used for a number of purposes. Some people use it for everyday transactions, while others prefer to use BTC as a store of value, making it an alternative to gold. Others simply invest, trade, and speculate using the cryptocurrency.
Why Does Bitcoin Have Value?
Bitcoin’s high value is determined by a number of factors. The cryptocurrency was the first to solve the Byzantine Generals’ problem, bringing trust to a decentralized system. As the system is decentralized and is governed by code, its fixed and predictable monetary policy cannot be changed unless there’s consensus to do so. Bitcoin uses open-source code and is built on top of a transparent network, making it possible for anyone to independently verify its security, its activity, and the balances of specific accounts on the blockchain. Miners use tremendous amounts of energy to support Bitcoin’s encrypted network, forcing potential attackers to require impossible amounts of energy to do anything to it. The network’s uptime since inception is above 99.987%, making it more reliable than traditional payments networks. Moreover, anyone can create a Bitcoin wallet and start using the network, making it open to anyone in the world regardless of their financial conditions. Bitcoin is an unencodable network that allows for fast peer-to-peer transactions throughout the world at low transaction fees. While no single entity controls Bitcoin, everyone can participate in the project by creating new businesses around it, helping develop it, mining it, running a node to help secure and relay transactions, documenting its history, using BTC, or simply talking about it.
What is a DCA-CC Calculator and How to Use it?
If you want to test out your investment strategy, you'll need to understand how it works and what you're hoping to achieve. This is where the DCA-CC calculator comes in - it can help you see if your strategy will generate the return you want.
The calculator is separated into two modes: the dollar cost average calculator and the lump sum investing calculator. You can use either one to budget for your investments on a regular basis, or to invest all your money at once.
To use the DCA-CC, start by entering a DCA or lump sum investment amount. Then, select the time period, interval, and investment you want to use. The calculator will show you how your strategy would perform under those conditions. You can also experiment with different parameters to see how they affect your results.
And that's not all! The DCA-CC also lets you see how your investment would fare if you used the lump sum strategy. So if you're not sure which approach is right for you, this calculator can help you compare and make the best decision.
What is DCA (Dollar Cost Averaging)?
DCA is like buying a little bit of your favorite cryptocurrency each week or month regardless of the price. By buying equal dollar amounts at regular intervals, you're helping to smooth out the bumps of a volatile market.
Think of it as when buying a house. When you want to buy a house, you don't just fork over all the cash upfront. You make a down payment, and then you pay the mortgage every month. Over time, the house is yours.
DCA is like that, but with investments. You spread your investment out over time, so you're less likely to buy when the market is high. And just like with a house, you eventually own more and more of your investment.
By buying a little bit of your favorite cryptocurrency each day, week or month, you're making small, regular payments that will help you get the coin you want without waiting for a price dip.
Of course, there is always the risk that the price of the coin could continue to fall. However, this risk can be mitigated by using DCA when the market is trending upwards.
How to use DCA-CC to backtest your dollar cost average strategy?
Do you want to know how effective your dollar cost averaging strategy would have been in the past? The DCA-CC calculator can tell you for sure!
This tool is designed to help you backtest your investment strategy, so you can compare it against other strategies and decide which one is best for you.
When you first use the tool, we'll make some assumptions about your potential investment. For example, we'll assume you're investing $10 in bitcoin every week for the past three years.
Of course, you can change the parameters at any time to get more accurate results. So why wait? Use the DCA-CC calculator tool now and find out how your investment strategy would have fared in the past.
Top 3 cards
Value in FIAT, BTC selling price and Total investment cards are the easiest to understand. However, we'll give a little more explanation:
What is DCA Value in FIAT card?
The Value in FIAT card is a great way to see the value of your investments after a dollar cost averaging period. This card can help you understand how DCA affects the value of your investment over time.
The scale on the lower part of the widget displays the investment to interest ratio. In other words: it shows how much of your investment is lost or how much was added to your investment due to the earnings.
What does the DCA Value in FIAT card show?
This card lets you know how much your cryptocurrency is worth in Fiat currency at the end of your investment period. In other words, the price you sell it at.
The card also shows you the price of your first order, so you can see how the market volatility affects your investment over time.
Lastly, the card shows the ratio of the selling price to the average price. This is helpful in determining the value of your investment strategy and how it impacts the selling price.
What is a DCA Total Investment card?
The total investment card calculates how much money you would have invested, given an initial investment and an investment interval, over a specified period of time.
For example, if you invest $100 every month for 3 years, the total investment card would show you how much money you would have invested at the end of those 3 years.
We are presenting two charts here: a chart of earnings over time, and a chart of price over time. These charts can help provide context and perspective, and allow you to see what would be different if you entered or exited the market at a different time.
Earnings over time
This chart shows how much money you've made over time from your investments. It includes your balance in FIAT (the dollar equivalent of cryptocurrencies) as well as your total investment up to that day.
BTC price over time
This chart shows the price of a given cryptocurrency over time, as well as the average cost of a cryptocurrency on any given day.
This chart can help you understand the value of dollar cost averaging as a strategy, and how it may impact your earnings.
What is a Fact card?
The Fact card is an automated message that summarises all the information from all the charts in a short, sharable sentence.
What is Profit/Loss card?
The Profit/Loss card is a tool that can help you to better manage your risks by understanding how often you might be making a profit. As with everyhing else here, this card can provide guidance and clarity in your decision-making process.
What is Purchase history?
What you'll find here is a table of purchase data, which includes information like how much cryptocurrency you could buy with the money invested on a given day, or how much you would have profited or lost at a given point in history.
What is Lump Sum Investing strategy?
Lump sum investing strategy is a method of investing where you invest a fixed sum of money all at once. This is in contrast to dollar-cost averaging, where you spread your investment into several installments over a period of time.
Lump sum investing has its pros and cons. On the plus side, you only have to make the investment decision once. And, if you’re investing in a volatile asset like cryptocurrency, you may benefit from buying when prices are low and selling when prices are high. On the downside, you could end up buying at the top of a market bubble – and we all know how those end.
So, should you go with lump sum investing or dollar-cost averaging? That depends on your investment goals and your personal risk tolerance. If you’re the type of person who can stomach the ups and downs of the market, and you believe in the long-term potential of the asset you’re investing in, then lump sum investing may be the way to go.
How to use DCA-CC to backtest your lump sum investment strategy?
DCA-CC is a powerful, easy to use backtesting tool that can be used to test and optimise your investment strategy.
The DCA-CC calculator will help you calculate the performance of your investment strategy across different market conditions.
You can also compare your performance against other strategies such as dollar cost averaging.
It's easy to use and only takes a few seconds to set up.
Here's how it works:
Enter the amount of money you want to invest.
Choose the cryptocurrency you want to invest in.
Choose a time range
Press the "Calculate" button.
The DCA-CC calculator will then show you how much money you would have made if you had invested that money in the cryptocurrency at that price.
Lump Sum Widgets
Both lump sum investment and DCA widgets are very similar, yet the strategy we employ is different. Some data is presented differently, so we will mention only these differences here.
Top 3 cards
As with the DCA strategy, we have three key cards here: Value in FIAT, BTC selling price and Total investment.
What is a Lump sum selling price card?
This card displays the value of the chosen cryptocurrency - the current selling price.
It also displays the ratio of the current selling price to the buying price. This information is helpful in showcase the value of your investment strategy and its impact on your selling price over time.
What is a Lump sum Total Investment card?
The amount on the total investment card will always be different from the investment parameter you entered into the calculator. This is because we calculate the total investment using the DCA strategy. Doing this allows us to show you the impact of investing the same amount of money using two different strategies.
As a reminder, in the DCA strategy, the total investment card takes your initial investment and your investment interval and multiplies it over the time period provided.