A recent analysis reveals that increasing leverage from 2x to 3x in Bitcoin investments results in only a 3.5% additional return, while significantly heightening risk. The study, based on five years of backtesting, shows that a 3x leveraged strategy barely outperforms a 2x strategy, with the latter yielding $66,474 and the former $68,833 from an initial $18,250 investment. However, the marginal gain is overshadowed by the extreme volatility and potential for near-total loss during market downturns.
The analysis highlights that the maximum drawdown for a 3x leveraged position is 95.9%, compared to 85.9% for 2x leverage and 49.9% for spot investments. This indicates that a 3x leveraged account could shrink to just 4% of its value at its lowest point, requiring a 2400% gain to recover. The study concludes that regular spot investments offer the best risk-adjusted returns, suggesting that lower leverage and longer investment horizons are more sustainable strategies for Bitcoin investors.
Leveraged DCA: 3x Leverage Yields Minimal Gains Amid High Risks
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