Today’s date is 9/18/22 and the market cap of cryptocurrencies has fallen from ~$2.9T on 11/10/21 to a local low of ~$800mm on 6/19/22. This is a drop of $2.1T in market cap which is a 72% drop from the all time high.

I think it is safe to say that we entered the new bear market in cryptocurrencies which gives investors a great opportunity to invest in cheap cryptocurrencies (relative to their ATH) until the start of the next bull run which usually happens a few months after the next Bitcoin Halving which will occur around March 2024.

So what did I do to prepare for this bear market? I decided to go back to the bull run of 2017, bear market of 2018–2020, and the bull run of 2021 to find clues as to what the best strategy is for maximizing returns while managing risk.

The first thing I needed was data. CoinMarketCap has all the data I needed but they asked $3K to be able to use their API to download all the historical coin info. So I spent 2 weeks copying and pasting the weekly marketcaps of the top 1,000 cryptocurrencies starting from the peak of the 2017 bull run (when Bitcoin hit $19,700 on 12/17/17 to the end of the 2021 bull run on 12/5/21). The reason I chose to start with the peak of the 2017 bull run was to see what would have happened if I decided to start investing in cryptocurrencies at the worst possible point in time which would have been on 12/17/17 as Bitcoin’s price dropped from $19.7K to about $3.2K a little over a year later.

Okay I have all the data, now what?

The next thing I wanted to compare was if it was better to try and time the market or dollar-cost-average?

Also, if I decided to dollar-cost-average, which coins would I pick? Would I just invest in the top 10? Top 50? 100? 250? 500?! 1,000?!

Who knows what the best strategy is but this is what I wanted to find out.

Let’s start with dollar-cost-averaging.

In excel, I used some fancy formulas to map out what would happen if I had $1,000,000 and decided to dollar cost average every single week in the top 100, 250, 500, and 1,000 cryptocurrencies.

I want you to make a guess now on which group (100, 250, 500, 1000) do you think performed the best.

Between 12/17/2017 to 12/5/2021, there were 208 weeks which means I calculated what my return would have been if I dollar cost averaged and invested $4807.69 per week ($1,000,000/208 weeks) from 12/17/2017 to 12/5/2021 in either the top 100, 250, 500, 1,000.

The winner was dollar-cost-averaging in the top 500 coins with a 558% return with my initial $1,000,000 turning into $6,584,930.

In 2nd place was the top 1,000 cryptocurrencies with a return of 352% turning the initial $1,000,000 into $4,524,449.

In 3rd place was the top 250 coins with a return of 345% with my initial $1,000,000 turning into $4,446,198.

Lastly, the top 100 cryptocurrencies resulted in a return of 298% with the initial $1,000,000 turning into $3,980,566.

How cool is this! You don’t even need to try and pick the winning cryptocurrencies and just invest in the top 100 cryptocurrencies and over the course of about 200 weeks you could have returned 300%! Also, remember, this assumes you started at the worst possible time when Bitcoin hit its all time high (at the time) $19.7K on 12/17/17.

Imagine what the returns would have been if you started when the market lost 66% from the all time high, which is exactly how much we are down today (9/18/22) from the all time high. The return would be significantly more than just 300% and all you need to do is dollar cost average into the top 100 cryptocurrencies.

Now that we know the outcome of the dollar cost averaging strategy, I wanted to see what would have happened if I chose a random week from 12/17/17 to 12/5/21 and invested my full $1,000,000 in the top 100, 250, 500, 1,000 cryptocurrencies.

Keep in mind market timing is very difficult and I don’t recommend investing all your dry powder at once but the what-if is fun to look at.

Below are the results (you may need to zoom in).

Let’s start by seeing what the return would have been if you invested your $1,000,000 exactly a year after the Bitcoin all time high of $19.7K which would have been on 12/17/2018.

If you invested the money in the top 1,000 coins on 12/17/2018, the return on 12/5/21 would have been 681%.

If you invested the money in the top 500 coins on 12/17/2018, the return on 12/5/21 would have been 1105% (Woah!).

If you invested the money in the top 250 coins on 12/17/2018, the return on 12/5/21 would have been 751%.

If you invested the money in the top 100 coins on 12/17/2018, the return on 12/5/21 would have been 864%.

Keep in mind, the cryptocurrency market dropped from a little over ~$800mm to ~$100mm (-87%) from 12/17/17 to 12/17/18.

That’s a pretty big dip to buy which makes sense why the returns would be so high.

Okay, what if we invested a year before the next Bitcoin Halving (if you don’t know what the Bitcoin Halving is feel free to reach out!). The recent Bitcoin Halving occurred around 5/11/2020 so let’s see what would have happened if we invested our $1,000,000 around 5/11/2019.

If you invested the money in the top 1,000 coins on 5/12/2019, the return on 12/5/21 would have been 388%.

If you invested the money in the top 500 coins on 5/12/2019, the return on 12/5/21 would have been 593% (Woah!).

If you invested the money in the top 250 coins on 5/12/2019, the return on 12/5/21 would have been 409%.

If you invested the money in the top 100 coins on 5/12/2019, the return on 12/5/21 would have been 460%.

Not as impressive as investing exactly a year later from the all time high but still great returns.

Lastly, let’s see what would have happened if we invested the $1,000,000 right after the Bitcoin Halving in May 2020.

If you invested the money in the top 1,000 coins on 5/17/2020, the return on 12/5/21 would have been 1231%.

If you invested the money in the top 500 coins on 5/17/2020, the return on 12/5/21 would have been 2087% (Woah!).

If you invested the money in the top 250 coins on 5/17/2020, the return on 12/5/21 would have been 791%.

If you invested the money in the top 100 coins on 5/17/2020, the return on 12/5/21 would have been 585%.

First of all, what?! The top 500 coins resulted in a gain of over a 20x? Yes, pretty crazy, I know.

I don’t think anyone can call the highs or lows in markets which is why I do think dollar cost averaging is the best strategy.

But I also think that if you can start to dollar cost average when we are in a bear market, that would result in the highest possible gains.

So what am I doing?

Starting in January 2023 (a little over a year from the Bitcoin all time high of $69K) until the Bitcoin halving in March 2024, I am planning on dollar cost averaging into my favorite cryptocurrencies which I’ll be sharing in future posts.

Thanks for reading! Let me know what you think!

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