Recently, Bitcoin Magazine published an article detailing the year long journey of a Redditor using the dollar cost averaging (DCA) method to purchase Bitcoin. His $5 per day spend resulted in a gain in value of just under 42% over the course of 365 days. They lauded his performance and choice of buying strategy, which would lead the typical reader to believe that DCA is the way to go. But let’s consider the alternative.
Our Redditor friend spent a total of $1825 on his Bitcoin at $5 per day. He ended up with $2,585.75 at the end of the year, giving him a total of 0.07569918 BTC. His 40+% return was pretty good. But what if he took the $1825 and spent it all on Bitcoin on Day 1? Would he have ended up with more or less Bitcoin?
According to his Reddit post, his first purchase was on October 28, 2022. We don’t know when he purchased his Bitcoin that day, but if we assume he bought at the daily high of $20,988.39, then his lump sum purchase of $1825 would have netted him 0.08608331 BTC. This includes a 1% fee on the purchase since his numbers took fees of 0.5 to 1% into account. Fast forward a year later, his Bitcoin would have a USD value of $2925.70 (62% return) assuming the low daily price of Bitcoin price of $33,986.79.
If he had made that initial lump sum purchase, he would have 14% more Bitcoin. Once Bitcoin hits, let’s say $100,000, that would be a $14,000 difference. That’s several months of salary for a lot of people.
Some might point to periods of time where the price of Bitcoin goes down to show that a lump sum purchase isn’t optimal, but this sort of Monday morning quarterbacking is silly. This exercise was good because an arbitrary date and a reasonable period of time was chosen to run this comparison. If we expect Bitcoin to appreciate in value in the long run, it doesn’t make sense to delay purchasing it. The price may drop in the short term, but at any given moment we might never see Bitcoin at a price lower than it is right now. This must be true if it is to be adopted as the global monetary standard.
If you have money to spend on Bitcoin, don’t delay your purchase. Dollar cost averaging is a bear’s game.