Bitcoin leveraged dollar-cost averaging, can it really earn more money? The truth from five years of backtesting

Many investors believe that “leveraging = earning more,” but five years of quantitative backtesting data reveal a harsh truth: increasing leverage does not necessarily lead to proportional gains and instead exposes you to exponential risks. This in-depth analysis will explore the true nature of leveraged dollar-cost averaging from a data perspective.

As of January 2026, BTC price fluctuates around $90.06K, with a market cap of $1799.36B, entering a new cycle. In this market environment, reviewing the performance of leveraged dollar-cost averaging over the past five years is especially important for current investment decisions.

Five-Year Backtest Reveals the True Landscape: Why Leverage Didn’t “Create a Gap”

Our backtest covers complete bull and bear cycles, tracking daily rebalanced positions for spot (1x), 2x leverage, and 3x leverage. The net value curves clearly show their performance trajectories:

Spot dollar-cost averaging (1x) exhibits a steady upward trend, maintaining relative stability even during downturns. This stability is exactly what long-term investors need.

2x leverage amplifies gains during bullish phases, delivering impressive short-term returns. But the key point is that, during downturns, while volatility increases, it remains within manageable psychological limits.

3x leverage is a different story. The net value curve, which repeatedly “climbs from the ground,” consistently lags behind 2x over several years. Only in the late rebound of 2025–2026 does 3x barely outperform 2x, but at a very heavy cost.

Key truth: The ultimate victory of 3x leverage heavily depends on “the last market move.” What does this mean? You need to endure years of psychological torment before the moment of turnaround. This “gamble on the last shot” logic is not recommended for ordinary investors.

Return Traps: Why Increasing from 3x Leverage Yields Marginal Gains

Many think leverage is “linearly amplified,” but reality is far more brutal. Comparing the five-year outcomes:

1x → 2x: earns about $23,700 more
2x → 3x: earns only about $2,300 more

From the first to the second stage, gains plateau almost entirely. This is a classic case of diminishing marginal returns—you take on more risk for only a tiny increase in reward.

Meanwhile, risk skyrockets exponentially. This is the most overlooked trap in leveraged dollar-cost averaging.

Hidden Killer: How Maximum Drawdown Destroys the Logic of Leverage

Numbers speak volumes—look at the real costs of historical drawdowns:

• -50% drawdown: psychologically tolerable
• -86% drawdown: requires 614% gain to recover
• -96% drawdown: requires 2400% gain to recover

In the 2022 bear market, 3x leverage was essentially “mathematically bankrupt.” Subsequent profits didn’t come from leverage advantages but from new capital gradually accumulating at lows after the bear market bottom. In other words, what truly saves you isn’t the leverage multiple but your persistence in dollar-cost averaging.

When the account suffers deep losses, risk indicators like the Ulcer Index can rise to 0.51—what does this mean? Your account remains “underwater” long-term, with the paper value providing almost no positive feedback. This long-term negative psychological pressure often damages your investment mindset more than the losses themselves.

Volatility Decay: The True Enemy of Leverage

Why is the long-term performance of 3x leverage so disappointing? The answer lies in a simple yet powerful mathematical principle:

Daily rebalancing + high volatility = continuous decay

In choppy markets, the system repeatedly cycles—adding positions when prices rise, reducing when prices fall, and gradually shrinking the account during sideways movements. This is the real picture of volatility drag.

Its destructive power is proportional to the square of the leverage multiple. This is crucial—on high-volatility assets like BTC, 3x leverage effectively incurs a 9-fold volatility penalty. This isn’t linear growth but a geometric expansion of risk.

The Truly Optimal Choice: Why Spot Dollar-Cost Averaging Is the Long-Term Solution

Risk-adjusted returns tell us three things:

1. Spot offers the highest risk-adjusted return—for each unit of risk, it yields the greatest reward
2. The higher the leverage, the worse the “cost-effectiveness” of downside risk—taking on 9x risk for only 3.5% extra return
3. 3x leverage remains in deep drawdown zones long-term—psychological stress is immense, and execution is far more difficult than with spot

The conclusion is clear:

• Spot dollar-cost averaging is the most optimal risk-reward choice, suitable for long-term steady implementation
• 2x leverage is the limit for aggressive investors, only suitable for those with risk awareness and psychological resilience
• 3x leverage has extremely low long-term cost-effectiveness and is not suitable as a dollar-cost averaging tool

If you truly believe in BTC’s long-term value, the most rational choice isn’t “adding another layer of leverage” chasing illusory profits, but making time your partner, not your enemy.

The core strength of dollar-cost averaging isn’t in the multiple but in persistence.

(This article is a rewritten analysis based on CryptoPunk’s original content, authorized by PANews. Data as of January 21, 2026.)