Ernest of Gaia
Fibonacci extensions are technical analysis tools used to project potential future price targets based on significant swing lows and highs. In our example, we identified a swing low of $48,200 (August 24, 2024) and a swing high of $109,297 (January 25, 2025). Using these levels, we calculated the following key extension targets for taking profits with a strategy down below:
61.8% Extension: $147,075
100% Extension: $170,394
161.8% Extension: $208,191
261.8% Extension: $269,288
These levels serve as potential future price targets where Bitcoin may encounter resistance during an upward trend. They provide a framework for identifying long-term profit zones when planning investments. These are great targets to set as take profit targets. In a later blog post we will revisit the Dynamic DCA out of the position! This Report follows a 3 Day Strategy. Check your position every 3 days for the rest of the year. Assumes a $1,000 Investment into the strategy.
Scaling into pullbacks is a long-term strategy that involves gradually buying Bitcoin during market corrections, aiming to accumulate more at lower prices. This approach is effective when combined with Fibonacci retracement levels, which highlight potential support zones.
In our analysis, key retracement levels to accumulate are:
38.2% Retracement: $86,964
50% Retracement: $78,748
61.8% Retracement: $70,531
These levels are considered strong support areas where buyers may step in, making them ideal zones for scaling in. Most of us have already been doing this and these targets may not manifest. But you can be prepared if they do. Changing the Swing Low Target may give more likely accumulation targets.
Let's Take a breather
Dynamic Cost Averaging is a variation of traditional DCA. Instead of investing a fixed amount regularly, the allocation varies based on market conditions. In this case, we allocate more capital during significant pullbacks (near Fibonacci retracement levels) to maximize accumulation at lower prices.
Objective: Accumulate Bitcoin over the next few months using a 3-day strategy. Adjust investments based on price proximity to retracement levels.
Plan: Split the $1,000 into three categories: Base DCA, Pullback Scaling, and Reserve Capital.
Divide the Account:
Base DCA: 50% ($500)
Pullback Scaling: 30% ($300)
Reserve Capital: 20% ($200)
Execute a 3-Day Cycle:
Day 1: Invest $20 from Base DCA regardless of price.
Day 2: Monitor the price. If the price approaches the 38.2% retracement level ($86,964), allocate an additional $30 from Pullback Scaling.
Day 3: If the price reaches the 50% retracement level ($78,748), invest $50 from Pullback Scaling. If no retracement occurs, skip this step.
Use Reserve Capital Dynamically:
Reserve the $200 for extreme corrections (approaching 61.8% retracement ($70,531)). Deploy this amount if the market reaches this level, ensuring a higher accumulation at lower prices.
Adjust for Market Trends:
If Bitcoin breaks below the 78.6% retracement ($60,303), hold Reserve Capital to wait for further confirmation before re-entering.
If Bitcoin consistently trades around the 38.2% to 61.8% retracement levels, your investments could look like this:
Base DCA: $200 over 10 cycles ($20 per cycle)
Pullback Scaling: $200 deployed during corrections
Reserve Capital: $100 used if extreme corrections occur
Risk Mitigation: Gradual scaling reduces the impact of sudden price drops.
Profit Optimization: Allocating more capital at lower prices increases the average Bitcoin quantity accumulated.
Flexibility: Dynamic adjustments allow for strategic deployment of capital in volatile conditions.
To understand these concepts further, here are a few recommended resources:
Fibonacci Retracement and Extension Basics: Investopedia Guide to Fibonacci Retracements (link)
Dynamic Cost Averaging Explained: Article on DCA Variations (link)
Bitcoin Market Trends: TradingView BTC/USD Analysis (link)
This strategy of using Fibonacci extensions and Dynamic Cost Averaging helps balance risk and reward. By scaling into pullbacks, you align your actions with the market’s natural rhythm, just like finding the perfect harmony on a harmonica. Stay patient, track your levels, and let the strategy guide you—all while keeping a reserve for unforeseen opportunities.
