According to an analysis shared by Redditor u/skogsraw, selling a portion of Bitcoin (BTC) when the market is in a state of “extreme greed” is a more profitable investment strategy than simply holding it. The analysis compared a dollar-cost averaging (DCA) strategy using the Crypto Fear & Greed Index to a “vanilla” DCA strategy. The benchmark strategy involved investing $100 into Bitcoin every week from March 17, 2018, to Sept. 9, 2023, resulting in a 124.8% return on investment (ROI).
The second strategy implemented a tiered DCA plan, purchasing $150 of Bitcoin each week during times of “extreme fear,” $100 during “fear,” $75 during “neutral,” $50 during “greed,” and $25 during “extreme greed.”
The third strategy was similar, but it involved selling 5% of the accumulated Bitcoin each week if the market was in the “extreme greed” zone. This strategy proved to be the most profitable, with an ROI of 184.2%, compared to the benchmark strategy’s 124.8% and the no-selling strategy’s 140.1%.
It’s worth noting that the Redditor did not explain why they chose the specific dates but mentioned that selecting a market bottom or top would not have been fair. The analysis covered at least two major bear markets and one bull market. However, u/skogsraw acknowledged that the tests have not been cross-checked and recommended conducting testing across various timeframes.
The analysis did not consider Bitcoin network fees for trading, which tend to increase during times of “extreme greed.”
These findings align with the Crypto Fear & Greed Index’s perspective that market corrections often occur when investors become excessively greedy.
u/skogsraw also tested two other strategies, “AlphaSquared Risk Model DCA” and “PI Cycle Top Indicator,” which yielded ROIs of 385% and 332.4%, respectively. However, commentators raised doubts about the results of these two complex data-driven trading strategies.
As of March 22, the Crypto Fear & Greed Index score is currently at 75/100, indicating “greed.” This is a 15-point decrease from March 5, when it reached 90/100, indicating “extreme greed” — the highest score since Feb. 20, 2021.