There has been a bit of an “online scuffle” recently amongst the most ardent Bitcoiners about terminology around stacking sats.
A lot of people refer to buying sats daily as Dollar Cost Averaging (DCA) and although regular people use the daily buys and DCA terms interchangeably, it grinds some people’s gears.
Personally, I’m not too fussed as long as you understand what the other person means, they can call it whatever they want for all I care. If you’re adding to your sats pile, more power to you!
However, from my understanding, there is a difference between “Dollar Cost Averaging” and “Saving In Bitcoin” so let’s have a little look at what these two things are.
Dollar Cost Averaging
Dollar Cost Averaging is when you have a total defined amount that you are going to invest with. Instead of investing it all in one go, this is split in to smaller amounts at regular time intervals.
The intention here is to ride out price fluctuations and get an average price that isn’t too badly affected with any volatility. If you first bought at a high price and then the rest of your buys kept going as the price went down, then your average price you bought at will also go down.
Once that defined amount has been invested and the last buy has completed, you will have your average cost price for your investment. Then it’s a case of waiting for a long time period or price point that you wanted to sell at and away you go.
An example here would be if you had $1,000 to invest and you split it into 10 x $100 buys per week for 10 weeks and started when Bitcoin was at $60,000. Bitcoin then drops in price to $30,000 like in April-June 2021 so your average price you bought at would drop down.
The key point here is that you have a specific amount to invest with a specific price point or time period at which you will sell. Classic traditional investment strategy.
However, for folks like us who look to Bitcoin as a savings account, selling might not come in to the thought process at all.
Saving In Bitcoin
Unlike the DCA approach, Bitcoin savers are people who convert their excess fiat into Bitcoin on a regular basis with no specific target at which they sell at.
When I choose to save in Bitcoin, I’m not really interested in chasing price targets to sell at, I’m more interested in price points to buy at.
Setting up automatic buys at regular intervals has helped take the strain away from stressful chart watching as my aim is just to build up as much of a savings pot as possible. The lower the price, the more sats I get for the same amount of fiat.
I also look out for FUD articles from mainstream media that try to bring the price of Bitcoin down because I see it as a good opportunity to add more to my Bitcoin savings, on top of the regular buys.
For the Bitcoin saver, it’s all about preserving purchasing power from the effects of inflation and taking advantage of Bitcoin’s NGU technology long term.
There is no real defined “end point” with saving in Bitcoin when compared to Dollar Cost Averaging but if you are saving for a life changing purchase of some sort then your end point is up to you of course!
Despite the subtle differences between these two approaches, most people will use the phrases interchangeably without batting an eyelid. For me, they both have the common goal of acquiring more Bitcoin, which is definitely something I can get behind!