Five-year backtest data shows that Bitcoin’s 3x leveraged dollar-cost averaging returns are only 3.5% higher than 2x leverage, but it carries nearly zeroing-out risk. From a risk-reward perspective, spot dollar-cost averaging is the best long-term solution; 2x is the limit, and 3x is not worth it. This article is adapted from a piece by CryptoPunk, compiled, translated, and written by PANews.
(Background: Bitcoin breaks $96,000, Ethereum surpasses $3300, the entire network experiences $750 million in liquidations, “shorts liquidated for $660 million”)
(Additional context: US December core CPI slightly below expectations! Gold and silver continue to hit new highs, Bitcoin breaks $92,000, Ethereum surpasses $3100)

Table of Contents

• One | Five-year dollar-cost averaging net value curve: 3x does not “widen the gap”
• Two | Final return comparison: Marginal gains of leverage rapidly diminish
• Three | Maximum drawdown: 3x is close to “structural failure”
• Four | Risk-adjusted returns: Spot is actually the best
• Why does 3x leverage perform so poorly in the long run?
• Final conclusion: BTC itself is already a “high-risk asset”

Summary upfront:

In the past five years of backtesting, BTC’s 3x leveraged dollar-cost averaging yields only 3.5% more than 2x leverage, but at the cost of nearly zeroing out the risk.

From a comprehensive view of risk, reward, and feasibility—spot dollar-cost averaging is actually the best long-term solution; 2x is the limit; 3x is not worth it.

One | Five-year dollar-cost averaging net value curve: 3x does not “widen the gap”

From the net value trend, it is clear that:

• Spot (1x): The curve is smooth and upward, with manageable drawdowns
• 2x leverage: Significantly amplifies gains during bull markets
• 3x leverage: Multiple “ground-hugging” phases, long-term oscillations erode value

Although in the rebound of 2025–2026, 3x slightly outperforms 2x,

but over several years, the net value of 3x always lags behind 2x.

Note: The backtest used daily rebalancing for leverage, which introduces volatility decay.

This means:

The final victory of 3x heavily depends on “the last phase of the market”

Two | Final return comparison: Marginal gains of leverage rapidly diminish

The key is not “who earns the most,” but how much more:

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

Returns hardly grow, but risks increase exponentially

Three | Maximum drawdown: 3x is close to “structural failure”

A very critical real-world issue here:

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

In the 2022 bear market, 3x leverage has essentially “mathematically failed,”

and subsequent profits are almost entirely from new capital injected at the bottom of the bear market.

Four | Risk-adjusted returns: Spot is actually the best

This data shows three things:

2. Spot has the highest risk-adjusted return per unit of risk
3. The higher the leverage, the worse the “cost-performance” of downside risk
4. 3x remains in deep drawdown zones long-term, with extreme psychological pressure

What does an Ulcer Index of 0.51 mean?

The account stays underwater long-term, almost giving no positive feedback

Why does 3x leverage perform so poorly in the long run?

The reason is simple:

Daily rebalancing + high volatility = continuous decay

In volatile markets:

• Rising → Increase position
• Falling → Decrease position
• No change → Account value continues to shrink

This is a classic volatility drag.

And its destructive power is proportional to the square of the leverage multiple.

On high-volatility assets like BTC,

3x leverage endures a 9-fold volatility penalty.

Final conclusion: BTC itself is already a “high-risk asset”

The answer from this five-year backtest is very clear:

• Spot dollar-cost averaging: the best risk-reward ratio, suitable for long-term execution
• 2x leverage: aggressive upper limit, only suitable for a few
• 3x leverage: extremely low long-term cost-performance, not suitable as a dollar-cost averaging tool

If you believe in BTC’s long-term value,

then the most rational choice is often not “adding another layer of leverage,”

but letting time work in your favor instead of becoming your enemy.