Thoughts on "Bitcoin Fixed Investment Index"

Recently, some readers mentioned the Jiushen Bitcoin fixed investment index and asked if there is a similar fixed investment index for Ethereum. Today I will share with you some views on this aspect.

Nine Gods Bitcoin Fixed Investment Index is regarded as an important reference data for Bitcoin Fixed Investment by many new and old players. I also talked about this index in an earlier article. Why is this data quoted so much?

Let's first look at what the Jiushen Bitcoin Fixed Investment Index is. This index is calculated according to the following formula:

Jiushen Index = (Bitcoin price / 200-day investment cost) * (Bitcoin price / index growth valuation).

The core point of this index is that it compares the currency price of Bitcoin with the long-term valuation and investment cost of Bitcoin, so as to judge whether the currency price of Bitcoin is high or low relative to its long-term valuation and investment cost in the short term . If it is lower than a certain value, Bitcoin is suitable for buying, and if it is higher than a certain value, Bitcoin is not suitable for buying.

Looking further at the formula, this index depends on two key parameters with long-term reference significance: one is the fitting of the long-term currency price, and the other is the 200-day fixed investment cost of the currency price. So this "long term" is very important in the whole formula. But as for how long to count as "long", the inventor of the formula chose 200 days, which is about 7 months.

Whether the choice of this time is appropriate is a matter of opinion. Different investors can completely modify this formula according to their own observation results and practical experience, such as choosing 100 days, or even 360 days and so on.

Just because the selection of this "long-term" time can be adjusted and is an empirical value, this index is actually a dynamic index and a relative ratio.

Based on the experience of bulls and bears in the past and the feedback of many investors, this formula is of great reference value in the fixed investment of Bitcoin. But there is one aspect of this formula that is a bit inconsistent with my investment habits.

For example, in a bull market, we may see such a situation: near the middle or late stage of the bull market, the currency price has been hovering at a relatively high position for a period of time. A medium to small decline, at this time the opinion given by this indicator is likely to be a buy.

But I will be more conservative in this situation and will not buy. why? Because I think the bubble in the bull market is relatively large at this time, and there is a danger of a collapse at any time. It is not worth taking the risk of buying for this drop. Buying at this time will not have too much room for future growth, but the risks you face are getting higher and higher.

So in general, I will only refer to this index, but generally I will not guide my investment behavior according to this index. The method I use for fixed investment is simpler and more conservative: that is, when Bitcoin falls by 60% from the peak of the bull market, you can start small-scale fixed investment, and after it falls by 70%, you can start to increase the intensity of fixed investment. After 50% to 60% of the fixed investment, the fixed investment will stop.

It should be noted that the peak of the bull market I am referring to here refers to the peak of the bull market that I recognize, not the peak of the bull market judged by market sentiment. What does it mean? Taking the recent example as an example, Bitcoin has recently risen to more than 60,000 US dollars, but now it is only 34,000 US dollars. Does that mean that if Bitcoin continues to fall, I will start to invest? At least not for now, because I don’t think $60,000 is the peak value of Bitcoin in this round of bull market, so I won’t make a fixed investment in this case, unless Bitcoin continues to fall and falls to $10,000, I will start a fixed investment again .

This method is temporarily applicable in previous bear markets, but whether it is still applicable in the future, we need to continue to observe to see how the market will change.

For the Nine Gods Index, to some extent, I prefer to regard it as an indicator for judging the level of short-term risks. Combine this indicator with other indicators to judge whether the bull market has reached its peak or is close to its peak.

We can use this analogy to make an Ethereum fixed investment index, but this index, I will only use it as an index to judge market risk, and it is not likely to be used as an index to guide my own fixed investment. To invest in Ethereum, I will still use the simple and conservative method I shared earlier.

In fact, no matter what method is used, the most important thing for investors is to understand the essence of a method, and choose suitable indicators based on their own investment habits and investment methods, so as to extract their own effective investment methods.

Since it is a dynamic index and a relative ratio, it shows that its scope of application must be within a certain range, that is to say, within a certain period of time, when the price of Bitcoin is underestimated relative to the fixed investment cost or long-term valuation, it is suitable to buy enter.