Why Simulate?
Bitcoin crossed $1,000 in late 2013 and brushed $68,000 in November 2021. Any strategy that bought more on the way up looks brilliant against that backdrop. Hindsight flatters the bold.
Backtests run on that history. The trouble is that the next decade may not rhyme with the last one. A long bear, a flat stretch, a slow bleed to zero: none of these appear in the record, yet any one could define the next three years.
To probe that gap, three years of synthetic daily prices were generated across six scenarios and stitched onto real history (so indicators have a full warmup window). Standard DCA, Power Law DCA, and Signal DCA were then run through each. The point is not prediction. It is to see which strategy holds up when the future refuses to cooperate.
Limitation: on-chain indicators (MVRV, NUPL, Puell, Fees) and macro indicators (M2, DXY) cannot be simulated. Only price-based indicators contribute here, so real-world results would differ.
The Scenarios
Summary
What the Simulations Show
The signal strategies win every scenario, but not through better timing. They win by deploying more capital. Over three years, Signal DCA pulls $42k-$55k from the saver's pocket. Standard DCA pulls $11k. Even when the market drifts down, the extra BTC bought at lower prices is worth more at the finish line.
The backtest finding holds in the forward test. The signal is a capital allocation framework. It instructs the saver to invest more when conditions look favorable. Bull, bear, sideways: in every scenario, that guidance produces more value. It also produces more risk.
The sell mechanism barely activates. Power Law's D and F grades fire only in the bull run, where price climbs into the upper corridor. In the prolonged bear, the slow bleed, the sideways drift, and the crash-and-recovery, price stays in the lower corridor. The signal correctly tags cheap conditions. It never gets the chance to sell and redeploy. That sell-and-redeploy cycle, the engine of Power Law's capital efficiency in backtesting, needs a parabolic move. Only the bull run and the hypervolatile path deliver one.
The real risk: in a prolonged bear, Signal DCA pushes $54k of personal capital into a declining asset. Standard DCA pushes $11k. If BTC went to zero, Signal DCA loses five times as much real money. The signal does not protect capital. It deploys it.
Caveats
- Synthetic data. The scenarios come from random walks plus drift. Real markets carry regime changes, black swans, and correlations that random walks miss.
- Missing indicators. Six of 13 indicators (on-chain plus macro) cannot be simulated. The composite score uses only price-based inputs here.
- Fixed seed. Results are reproducible (seed=42), and a different seed would trace different paths. The directional findings (the signal invests more, and wins if BTC retains any value) hold across seeds.
- Not a prediction. Which scenario arrives is unknowable. What is knowable is the trade: the signal does not call the bottom. It writes a bigger check at it. In a market that recovers, that check compounds. In one that doesn't, it bleeds.