Bitcoin bull Nayib Bukele, El Salvador’s millennial president, finally appears ready to employ a time-tested investment strategy: dollar-cost averaging.
Bukele, who led the charge for El Salvador to become the first nation to adopt bitcoin as a legal tender, has tweeted that El Salvador will buy one BTC each day moving forward, starting today.
The move would mark the end of a nearly five-month break amid severe bear market conditions and the downfall of Sam Bankman-Fried’s sprawling $32 billion FTX empire.
Bukele’s last BTC purchase was on June 30, 2022, when he bought 80 BTC ($1.33 million) for $1.52 million, averaging out to $19,000 per coin, per NayibTracker.
Bitcoin’s price has been steadily falling all year, trading for $16,500 as of 9:30 am ET — 13% below Bukele’s last purchase price.
El Salvador, via Bukele’s smartphone, has overall invested $107.16 million on 2,381 BTC to date, according to BitcoinTreasuries, although the stash is currently worth just $39.4 million.
This leaves El Salvador down about 63% and nursing paper losses of almost $68 million.
El Salvador’s bitcoin fund also contains US dollars — the nation’s other legal tender. And despite Bukele’s mostly ill-time buys, the fund has previously been in the green.
When bitcoin was approaching all-time high last October, Bukele found himself a few million dollars ahead. He quickly pledged to siphon $4 million in profits from the fund to pay for a giant new pet hospital in capital San Salvador, which reportedly opened its doors in February.
Bukele says he’s never sold any bitcoin.
Dollar-cost averaging bitcoin could’ve left Bukele down less bad
Still, if Bukele had opted to dollar-cost average his bitcoin buys from the very beginning, El Salvador would be in a much better position than it is today.
Dollar-cost averaging is simply investing a fixed amount of cash at regular time intervals, regardless of market sentiment. This strategy, usually implemented by long-term investors, is pitched to offer protection from allocating capital at the top, something Bukele has been known to do with his bitcoin buys.
Back-of-the-napkin math shows Bukele:
- has spent $107.16 million on 2,381 BTC ($39.2 million) since Sept. 6, 2021,
- could’ve instead dollar-cost averaged $244,658 each day to
- receive 3,492 BTC ($57.5 million).
So, dollar-cost averaging from the start would’ve seen Bukele acquire an additional 1,111 BTC ($18.3 million), representing a bigger bitcoin stash by roughly 47%.
This would’ve saved El Salvador more than $18 million on its profit/loss statement, with Bukele only feeling $49.7 million in paper losses compared to his current $68 million. Bukele would’ve been down only 46%, instead of 63% today.
Indeed, while dollar-cost averaging the whole time would’ve helped Bukele, he would still be down on his bitcoin purchases to date — a feeling surely common among investors this year.
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Source: https://blockworks.co/news/dollar-cost-averaging-bitcoin-el-salvador