This article is going to continue the series of the DCA (Dollar Cost Average) investing strategy on various coins listed on the Midas platform. In this piece, we will be looking at e-Sports Betting Coin (ESBC) – a well established project that has been long standing in the industry. Nothing in this article should be considered financial advice, but rather should be taken as educational material on the benefits of the Dollar Cost Averaging strategy. Always do your own research before making any investment, and NEVER invest more than you are willing/able to lose.
What is Dollar Cost Averaging?
Dollar Cost Averaging is an investment strategy where an investor makes regular purchases of an asset. The goal of this strategy is to accumulate a position over time and over a variety of price points, resulting in a better overall entry. Since cryptocurrencies – especially low cap Masternode coins – can be quite volatile in price, this strategy reduces the overall risk. This is also known as the constant dollar plan.
It should be noted that this strategy is not a get rich quick scheme. Rather than basing your trading off of speculation and large price movements, the DCA strategy minimizes risk and is simple enough for inexperienced investors to use.
In this example, we will be looking at a DCA strategy applied on ESBC over a period of one year. For the purpose of showing the benefit of PoS and Masternode coins, all coins purchased for this example will be held in a Midas Instant Share.
Our Application of the Strategy
For this example, we will take price “snapshots” of ESBC on the first day of each month, starting in May 2019 and ending in May 2020. This will give us a total of 13 price points. Our hypothetical investor will be making a regular purchase of ESBC coins in the amount of $100 on the first day of every month – regardless of the price. We will examine the results on two alternative versions of the strategy: one with reward reinvestment, and one with selling rewards monthly.
Now we will take a look at the price of ESBC from May 2019 – May 2020.
In the above graph, price snapshots were taken on the first day of each month from May 2019 – May 2020. The value of ESBC was in steady decline for most of the year, reaching a low of $.0133 in April 2020 before rising sharply to $.053 in May. This rise represents an increase of nearly 400% in value.
- Total Capital Invested: $1300
- May 2020 balance (USD, Reinvesting): $2832.12
- May 2020 balance (USD, selling rewards): $2360.49
- *Dividend: $256.55
*NOTE: The “DIVIDEND” portion only applies to the “selling rewards” plan. The total portfolio value of this plan can be determined by adding the balance and dividend.
Below is a graph of portfolio value per month vs. investment amount:
The blue bar represents the total amount invested, and the red represents the ESBC portfolio value (with reward reinvestment). For the first few months of the strategy, the value was slightly in profit, but as ESBC declined in value, the portfolio was in a loss. Then in April, ESBC price skyrocketed by 400% to over $.05! Compounded by the reinvesting rewards and lower average-entry from the DCA strategy, the portfolio value is now very much in profit.
At the end of the one-year backtest, the DCA strategy with reward reinvestment yielded a 217.8% return on investment.
Alternatively, if you choose to sell rewards on a monthly basis, the strategy yields the following result:
Here the red bar represents invested capital, the blue bar represents portfolio value, and the yellow bar represents the dividend earned from selling rewards.
The total return of ESBC holding and sold dividend is $2617.04, representing a 201.3% return on investment. This is slightly lower than the reinvestment version of the strategy, but selling rewards reduces the overall volatility of the portfolio.
Both strategies have proved out to be very profitable, but the reinvestment strategy shows the power of Midas Instant Shares and how compound interest magnifies portfolio gains.
We will continue our DCA analysis on various coins and coin portfolios available on the Midas platform in the coming days/weeks. Stay tuned for more updates!