Ethereum DCA Strategy: 5 Rules Backtested vs Classic DCA

The question: can $1,000 a month in ETH buy a house?

The video starts from a simple test. Could a normal person putting $1,000 a month into Ethereum reach the price of a house? The start date is chosen to be the worst possible one: January 2018, with ETH at $1,348, right before a 94% crash.

The plan is compared with a second investor doing classic DCA with exactly the same money. By September 2021 the rules-based portfolio could have paid for a house, and today it holds 285 ETH. This is a historical backtest, not financial advice.

Setting up the free planner

The rules run in a free browser tool. You pick a currency and a target house price, set to a typical US house at $450,000 in the video, and a yearly property price growth of 6%. You also choose a pause mode: strict pauses right at the upper band, flexible waits until the price is 40% above it.

Then you set a start date, a monthly budget and any ETH you already own. The video starts from zero with $1,000 a month from January 2018. The tool pulls every daily price from Binance since 2017 and simulates the plan day by day.

The map: a logarithmic regression band

Every rule depends on one chart. Three lines form a logarithmic regression band, a long-term growth model of the ETH price. Below the lower band, ETH has historically been cheap. The middle line is fair value, and above the upper band it is expensive.

Each marker on the chart is a real trade the tool made. The dashboard also shows how much ETH you hold, your cash reserve, the total value and your progress towards the house.

Rules 1 and 2: the base buy and the booster

Rule 1 is the base. Every month on the same day, a fixed amount goes in, $1,000 in this test. That part never changes. What changes is what happens around it.

Rule 2 is the booster. When the price is below the upper band, the tool adds extra from the cash reserve: 5% of the cash between the middle and upper band, 15% below the middle, and 30% below the lower band. If the price drops another 10%, it fires again. The video shows this in February this year: a regular buy plus 15% of the reserve, then another boost 9 days later.

Rule 3: the pause

When the price runs more than 40% above the upper band, the tool stops buying. The monthly money goes into the cash reserve instead. In spring 2021, every deposit was held in cash.

This reserve looks useless during a bull run. It becomes the most important part of the strategy once the market turns.

Rules 4 and 5: take profit and crash buys

Rule 4 sells small slices when the bubble really inflates: 5% of your ETH, then 10, 15, 20 and 30% at the extreme. It never sells everything at once. In early 2021 it was already selling 30% slices at around $1,600, which is the weak spot of the plan.

Rule 5 buys crashes. When ETH falls 50% from its peak, the tool deploys 15% of the cash reserve, then 20% at -60%, 30% at -70%, and 40% and 50% at -80% and -90%. In summer 2022, with ETH down about 70%, it put 30% of the reserve to work.

Classic DCA vs 5 rules: the full backtest

By December 2018, ETH was at $84. Both investors were down, but the rules kept buying the dip and already held more ETH. Then came the 2021 bull run, and classic DCA looked like a genius at almost $800,000 in November, while the strategy had about $380,000 because of those early sales.

In 2022 ETH fell 80%. Classic DCA dropped to $184,000, while the strategy held $100,000 in cash and kept buying. Today, on the same $106,000 of deposits, classic DCA has 193 ETH worth about $470,000. The 5 rules hold 285 ETH worth over $720,000, almost 100 ETH more.

The house target grows 6% a year in the tool. The strategy first covered it in September 2021, after only $44,000 of deposits. Today it covers the house with over $270,000 left.

The honest part: limits of this backtest

The regression band is fitted to past prices, so a backtest always looks a bit better than real life. Fees and taxes are not counted. Ethereum can drop 90% again, and nobody guarantees it comes back.

The strategy is also not always ahead. In 2021 classic DCA was miles ahead, and that is the moment most people would quit. Only invest money you will not need for years, and do your own research.

FAQ

Does a rules-based Ethereum DCA beat classic DCA?

In this backtest from January 2018, yes. With the same $106,000 in deposits, the 5 rules ended with 285 ETH versus 193 ETH for classic DCA. But classic DCA was far ahead during the 2021 bull run, and past results do not guarantee future ones.

What is a logarithmic regression band for ETH?

It is a long-term growth model of the ETH price drawn as three lines. Below the lower band ETH has historically been cheap, the middle is fair value, and above the upper band it is expensive. Because it is fitted to past prices, it makes backtests look a bit better than real life.

When does the strategy sell ETH?

Only when the price is far above the upper band. It sells small slices of 5%, 10%, 15%, 20% and 30% at the extreme, never everything at once. In early 2021 it was already selling 30% slices at around $1,600.

Is the Ethereum DCA planner free?

Yes. The planner runs in your browser, uses daily Binance prices since 2017 and is free. The link is in the video description, so you can plug in your own budget, start date and house price.