"Regular investment with leverage" tests not only returns but also expectations and psychology.

How many people jump in because they see leverage as a way to “amplify returns,” only to be scared into selling by the red numbers on their accounts? The psychological expectations in investing often determine success or failure more than calculation ability. In a five-year backtest of dollar-cost averaging for BTC, we discovered an unexpected truth: the higher the leverage multiple, the greater the psychological barrier to overcome, while the actual additional gains are almost negligible.

How Expectations Mislead Investment Decisions — The Truth from Five Years of Data

Many investors choose leverage multiples based solely on “theoretical maximum returns.” When BTC reaches $89.44K in early 2025, many ask: “Why not use 3x leverage to maximize returns?” But data will give you an awakening.

The five-year backtest results show:

• Spot (1x): Smooth upward curve, most stable long-term
• 2x leverage: Significantly amplifies profits during bull phases
• 3x leverage: Performs poorly most of the time, with multiple “climbing on the ground”

It appears that 3x slightly outperforms 2x in the final rebound, but at what cost? It’s the expectation psychology that has been continuously eroded and beaten down over years.

Why the Return Gap Is Small While Risks Multiply

This comparison reveals the true cost-effectiveness of leverage:

• 1x to 2x: Additional gains about $23,700
• 2x to 3x: Additional gains only $2,300

In other words, increasing leverage by 50% yields only a 10% increase in returns. But what about risk? Risk does not increase linearly.

Imagine an investor experiencing the 2022 bear market with 3x leverage. That year, the maximum drawdown hit -96%, meaning a 2400% rise was needed just to break even. This is no longer investing; it’s playing with fire. An investor with 2x leverage, though also suffering, only needs a smaller rally to recover.

This is the biggest battlefield of psychological expectations: when your account drops more than 90%, continuing to invest becomes incredibly difficult. Most people have already surrendered by then.

The Psychological Limit of Tolerance to Drawdowns: The Difference Between -86% and -96%

Risk management is not just a numbers game; it’s a psychological game:

• -50% drawdown: Most investors can accept and continue investing
• -86% drawdown: Requires +614% rally to recover, many start to waver
• -96% drawdown: Requires +2400% rally to recover, psychological collapse is complete

In the 2022 bear market, 3x leverage was essentially “mathematically bankrupt.” Any subsequent gains mostly came from new capital injected after the bottom, not from recovery of previous losses.

For most investors, -96% is beyond “acceptable risk.” Your psychological setting might be “I can tolerate -50%,” but ending up with -96% causes a mental shock that can lead to wrong decisions.

The True Cost of Volatility Drag: Why 3x Leverage Fails

Why does 3x leverage perform so poorly over the long term? The answer is simple:

Daily rebalancing + high volatility = continuous loss

What happens in volatile markets?

• Rising → system automatically adds positions
• Falling → system automatically reduces positions
• No movement → account value continues to shrink

This is classic volatility drag. Its destructive power is proportional to the square of the leverage multiple — 3x leverage bears 9 times the volatility penalty.

In other words, BTC is already a high-volatility asset (7-day price swings of -7.75%). When you add 3x leverage, the volatility pressure is magnified ninefold. This persistent volatility ultimately destroys your expectations — you can’t endure the constant fluctuations in your account balance.

Spot vs. Leveraged Risk-Adjusted Returns — Who Is the Real Winner?

When evaluating with risk-adjusted metrics (like the Ulcer Index), the conclusion reverses:

• Spot (1x) offers the highest risk-adjusted return. The higher the leverage, the worse the risk-to-reward “cost performance.” 3x leverage tends to stay in deep drawdown zones long-term, with accounts “underwater” most of the time, providing almost no positive psychological feedback.

This is the real problem — not just the return figures, but the ongoing erosion of expectations. Every time you see your account lose, your confidence weakens.

Final Advice: Is Time Your Ally or Enemy?

BTC is inherently a high-risk, high-reward asset. The past five years of data give a clear answer:

• Dollar-cost averaging in spot: The best risk-reward ratio, easiest to sustain long-term, most friendly to expectations
• 2x leverage: Suitable for aggressive investors, but only if you have strong psychological resilience
• 3x leverage: Extremely poor long-term value, diminishing marginal returns, and highly likely to trigger psychological collapse

If you believe in Bitcoin’s long-term value, the most rational choice is not to add more leverage. Extra leverage doesn’t help you reach your goal faster; instead, it makes you more vulnerable to psychological swings and potential failure.

The true winner is not the one who takes the highest leverage, but the one who can stick to it. And to stick to it, you must keep your expectations within manageable limits.

Let time be your ally, not your reason to give up.

(This article synthesizes analysis from PANews, integrating current market data and investment psychology perspectives)