Project: Crypto Investing Profit Simulation from Historical Data (4)
To get more insights from coinmarketcap.com's historical snapshots, I'm doing more simulations and having a closer look at the data.
I've simulated investing equally in top 10 crypto assets for 1, 4, 13, 26, 52 weeks. Instead of just getting the average of the profit, I wanted to see it's distribution. The distribution is not what I expected. It really depends on when you invest.
Below graph shows profit for 1 week investment depending when you invested. Average profit is 3.37% which is good. But probability of you getting plus profit is 53.8%. Probability of getting plus profit can be calculated by counting percent of points where it's above zero (0%).
Investing for 4 weeks does increase average profit to 19.65%, but probability of you getting plus profit is 49.81%. You are more likely to loose. When you invest for 3 months, average profit increases to 93.22% and probability of plus profit increases to 59.27%.
Investing for 6 months, average profit increases to 224.91%, probability of plus profit is 60%. Investing for a full year, average profit is 718.46% and probability of plus profit is 68.42%.
Here is a summary table of the average profit and probability of plus profit. Yearly profit is calculated using profit and invested weeks.
I've invested in cryptocurrencies for almost a year now. Seeing only the average profit made me believe that it was really easy to get profits. And I wasn't doing a good job. But probability of plus profit was what I missed. I think I'm doing ok now.
Here is my analysis of the simulation results:
- Profit really depends on when you invest.
- Long term investing is much better. More profits and higher probability of gain.
- If you can't predict the market, you should invest using dollar cost averaging. This makes your investment at least close to average.
Below Google sheet contains the data results for all simulations and graphs: