The Magic of Dollar-Cost-Averaging (DCA’ing) Bitcoin
Dollar cost averaging (DCA) imposes the discipline of buying fewer sats when the fiat price is higher and more sats when the fiat price is lower, thus giving you a lower fiat cost basis.
Matthew Kratter
Jun 26, 2024June 26, 20244 min read4 minutes read
Bitcoin University
Bitcoin University is an educational channel devoted to Bitcoin, financial freedom, and self-sovereignty. Matthew also covers relevant macro and financial news.
The Magic of Bitcoin DCA
DCA stands for dollar cost averaging, when you buy a fixed fiat amount of Bitcoin at regular intervals regardless of the price.
For Example: You buy $100 every Monday.
When Bitcoin’s price is low, that $100 buys you more sats than it normally would — when Bitcoin’s price is high, that $100 buys you fewer sats than it usually would.
Both properties help you get Bitcoin at a better average fiat price.
Dollar-cost averaging, as we’ll see, is a superpower.
You’ll often hear people say that Bitcoin has failed to keep up with inflation since its intraday peak on November 10, 2021, at roughly $69,000 per coin. So, hasn’t everyone been underwater in recurring Bitcoin purchases since then?
If we look at the chart, we’re currently trading just north of $61,000 per coin, and that peak was right here on November 10 when it hit approximately $69,000. So, we’re definitely underwater from there.
This allows you to enter a starting and ending date and decide how much you want to dollar cost average, providing a historical backtest of what would have happened.
If you had $100 and invested it all at the peak on November 10, 2021, you’d be down 82% on your investment. But look what happens if you decide to dollar-cost average.
In this example, we will look at dollar cost averaging weekly, bi-weekly (meaning every two weeks), semi-monthly, and monthly. Obviously, a one-time purchase here was not a good idea, but let’s see what would happen if we had dollar costs averaged weekly.
With $100 worth of Bitcoin each week, our return on investment would be over 102%. We would have spent $13,800 over this period, and the current market value of our Bitcoin would be almost $28,000, a 102.61% return.
If we had done the same thing on a bi-weekly basis, our returns would be similar, though we would have less Bitcoin because we invested less money.
Buying $100 worth of Bitcoin every two weeks instead of weekly. If we did it semi-monthly or even monthly, our returns would be approximately the same.
Now, let’s compare that to inflation. Looking at the Consumer Price Index (CPI) for all urban consumers, when Bitcoin peaked in November 2021, the CPI was approximately 279.
St. Louis Fed
The latest CPI reading from May 2024 is 313, an approximately 12.35% increase.
This index obviously understates the real inflation taking place. This is just the government lying at its best. But even if the real inflation rate for your household was 20% per year, over a couple of years and a few months, that’s about 60% total inflation compounded.
Bitcoin has still handily preserved your purchasing power, up over 100%, no matter how you slice it.
This is why it’s so important to dollar cost average. It’s also essential to HODL instead of trading in and out of Bitcoin.
As Jack Bogle used to say, “Time in the market beats timing the market.”
Saylor has a great summary of this from March 2024.
This is a 30-year chart of returns on the S&P index. This chart shows that if you missed one day, there’s one day every year when 85-90% of all gains occur and 36 hours a year when all investment returns occur.
So, in 365 days, nothing happens 99.5% of the time. This is why we have laser eyes and say HODL and trading Bitcoin is a sign of lesser intellect.
This is something I always remind people of on the channel.
Trading Bitcoin is a sign of lesser intellect. If you try to jump in and out of it, you’ll definitely underperform just HODLing, especially when you account for capital gains taxes.
Bitcoin University is an educational channel devoted to Bitcoin, financial freedom, and self-sovereignty. Matthew also covers relevant macro and financial news.
Matthew Kratter is the founder of Bitcoin University YouTube channel, which currently has over 235,000 subscribers.
Before going down the Bitcoin rabbit hole, he founded and ran Trader University, focusing on trading and investment strategies for stocks, options, and futures. Given his hedge fund background and decades of trading experience, Matthew provides a unique perspective.
In late 2019, after finally recognizing Bitcoin’s importance, he began liquidating his stocks and other investments and moving his savings into Bitcoin.
Now, Matthew is all in on Bitcoin, devoting the majority of my time to producing Bitcoin educational content on YouTube and on this site.
In his free time, he enjoys skiing and hiking in the Rockies with his wife, kids, and dogs.
Discover how Swan Vault puts you in full control of your Bitcoin with a simple, secure setup. See just how easy it is to safeguard your wealth and unlock your monetary autonomy.
