Fear & Greed Investing: A Superior Approach to Dollar Cost Averaging into Crypto

Investing in the UNIT ETF Using the Crypto Fear & Greed Index

Investing in cryptocurrencies can be a tricky task, given the volatility and unpredictability of the market. In this article, we’ll explore how buying TINU, the UNIT ETF, using the Crypto Fear & Greed Index can provide superior returns compared to employing a DCA strategy in Bitcoin (BTC).

Dollar Cost Averaging is a strategy where an investor divides the total amount to be invested across periodic purchases, regardless of the price. This mitigates the impact of volatility and removes the need to time the market. However, this strategy does not consider market sentiment, which can be a powerful driver of cryptocurrency prices.

This is where the Crypto Fear & Greed Index comes into play. This tool measures the two primary emotions that drive investors: fear and greed. It provides a tangible way to gauge market sentiment, offering investors a unique opportunity to achieve higher returns. The strategy is simple yet effective: buy when the market is driven by fear and sell when greed takes the reins.

Now, let’s bring UNIT into the equation. As an indexed benchmark for the entire crypto space, UNIT accurately represents the market average. This means that UNIT’s movements are highly synchronized with the overall market sentiment, making it an ideal asset for a Crypto Fear & Greed Index-based strategy.

By combining the Fear & Greed Index with UNIT, which mirrors the overall market performance, we believe it offers a unique approach that could potentially yield higher returns than traditional strategies such as DCA.

Let’s make a trading strategy. We’ll use a simple Jupyter Notebook to organize and run our Python code:

1. First import all the packages we need for this strategy, and request the Crypto Fear & Greed index history data from https://alternative.me/crypto/api/. The data frame below shows the time matching with the index of that day.

2. Get UNIT/USD history price data from our UNIT. We load this into a file to make it easier for us. This URL will give you all the data: https://app.unitindex.org/api/allBars?from=1540542722&to=1698309122&currency=USD&resolution=1d&coinId=d

3. Merge the two data frames into one to compare them easily. We selected the data from 2018.2.1 to 2023.10.30.

4. We plotted the two groups of data in the same graph to visualize the correlation. By finding the High-Fear area and High-Greed area in the Fear & Greed Index chart, we decided to set 20 and 50 as the threshold.

5. Now it’s time to make a simple investment strategy. As we believe in the future of UNIT’s rising market, we did not set a sell threshold in the strategy, which means a strategy of buying UNIT when the Crypto Fear & Greed Index is 20 and then continuing to hold. Whenever the index drops below 20, we buy $100 worth of TINU (the UNIT ETF), otherwise, we don’t buy. The data below shows how much TINU we bought every day using this strategy.

6. Calculating the total investment of $23500, and the total revenue of $97956, the return is 4.16x.

7. Now creating the DCA strategy: Calculate the average daily input by dividing the total investment ($23500) by the total number of days (length of the data frame rows), the result is $11.217284. So we would be investing $11.217284 every day.

8. The total revenue then is only $69323 with the same investment amount. It can only bring us a 2.95x return. Our strategy using the Fear & Greed Index is indeed better.

9. Now, knowing that our strategy is better, we need to find the optimal threshold. Comparing the total return using different index numbers (1–100), we can tell that the best threshold is indeed our previous choice 20.

We have found the optimum historic Crypto Fear & Greed Index cutoff for investing in Crypto using TINU. Our strategy has achieved a 4.16x return versus the 2.95x return of a simple DCA strategy.

Follow the UNIT at https://x.com/unit_index and visit unitindex.org, and gain early access to these opportunities.