Better return by buying $35 per day of BTC on Coinbase, everyday?

[mskryxz]

Instead of just buying 1 full BTC once per month, what about just buy $35 worth everyday or 35 x 30 days = $1050 invested into BTC per month.

Wouldn't that be safer and get a true average of what a BTC is worth for the month alone?

If anyone is up for it we should plot a few examples of one were to buy daily for the past year of 2013 compared to just trying to time the market and buying only 1 at a bad/good time.

Hope this makes sense.

[mskryxz]

I wonder if my bank will close my account for buying a fraction of a BTC everyday though...?
Wells Fargo for the record. So far no problems but ya never know!

[virtualfaqs]

1 BTC a month is the limit there?

Well that sux.

[HairyMaclairy]

It's called dollar cost averaging.  And yes it is better than calling the market wrong and worse than calling the market right.  

My preferred technique is to incrementally buy while the price is falling (although it is scary as shit especially when the price drop is accelerating).  But if you wait for the bottom you will miss it every time.

It also forces you to keep your fiat sitting on the exchange which comes with its own risks. 

[billyjoeallen]

It's called dollar cost averaging.  And yes it is better than calling the market wrong and worse than calling the market right. 

My preferred technique is to incrementally buy while the price is falling (although it is scary as shit especially when the price drop is accelerating).  But if you wait for the bottom you will miss it every time.

+1 that.

[Malte]

Risto came up with some historical data to support his claim to not "DCA" (dollar cost average buy):

NO. DO NOT "DOLLAR COST AVERAGE", SINCE IT LEADS TO A MARKEDLY WORSE RESULT IN EVERY SCENARIO WHERE BITCOIN CONTINUES APPRECIATING AGAINST THE DOLLAR AS HAS ALWAYS BEEN THE CASE SO FAR.

This requires proof. I downloaded the longest timeseries of Bitcoin trading activity available (Mt.Gox USD), and set the following:

A person wants to invest $1,000 in Bitcoin, and has the following options:

- Invest it all now, at an average price this week.
- Invest it in 4 equal lots in 4 subsequent weeks, starting this week.
- Invest it similarly over 8 weeks
- Over 12 weeks.
- Over 26 weeks (6 months)
- Over 52 weeks (12 months).

Then I calculated, how many bitcoins can be gained/lost by spreading the purchases. Result:

On average, by buying all instantly, the following advantage over other options was gained:

4 weeks = +8%
8 weeks = +20%
12 weeks = +33%
26 weeks = +79%
52 weeks = +161%.

In some cases DCA does come out ahead. In the 10% cases that most favored DCA, their advantage was (negative sign=DCA advantage):

4 weeks = -13%
8 weeks = -22%
12 weeks = -31%
26 weeks = -30%
52 weeks = -46%.

On the other hand the 10% most favorable cases for instant buying yield the following:

4 weeks = +33%
8 weeks = +77%
12 weeks = +101%
26 weeks = +214%
52 weeks = +416%.

By dollar cost averaging, the most would have been gained by having a 52-week plan instead of an instant lock-in in the week of 6.6.2011. (-77% less coins for instant).

By buying instantly, the largest advantage over DCA would have been by buying in the week of 27.9.2010 instead of during the following year (+629% more coins).

[mskryxz]

Risto came up with some historical data to support his claim to not "DCA" (dollar cost average buy):

NO. DO NOT "DOLLAR COST AVERAGE", SINCE IT LEADS TO A MARKEDLY WORSE RESULT IN EVERY SCENARIO WHERE BITCOIN CONTINUES APPRECIATING AGAINST THE DOLLAR AS HAS ALWAYS BEEN THE CASE SO FAR.

This requires proof. I downloaded the longest timeseries of Bitcoin trading activity available (Mt.Gox USD), and set the following:

A person wants to invest $1,000 in Bitcoin, and has the following options:

- Invest it all now, at an average price this week.
- Invest it in 4 equal lots in 4 subsequent weeks, starting this week.
- Invest it similarly over 8 weeks
- Over 12 weeks.
- Over 26 weeks (6 months)
- Over 52 weeks (12 months).

Then I calculated, how many bitcoins can be gained/lost by spreading the purchases. Result:

On average, by buying all instantly, the following advantage over other options was gained:

4 weeks = +8%
8 weeks = +20%
12 weeks = +33%
26 weeks = +79%
52 weeks = +161%.

In some cases DCA does come out ahead. In the 10% cases that most favored DCA, their advantage was (negative sign=DCA advantage):

4 weeks = -13%
8 weeks = -22%
12 weeks = -31%
26 weeks = -30%
52 weeks = -46%.

On the other hand the 10% most favorable cases for instant buying yield the following:

4 weeks = +33%
8 weeks = +77%
12 weeks = +101%
26 weeks = +214%
52 weeks = +416%.

By dollar cost averaging, the most would have been gained by having a 52-week plan instead of an instant lock-in in the week of 6.6.2011. (-77% less coins for instant).

By buying instantly, the largest advantage over DCA would have been by buying in the week of 27.9.2010 instead of during the following year (+629% more coins).

thank you very much sir

[Bono]

Looks like this has been settled with economic maths...

But it really seems more like common sense to me. The value of Bitcoin vs the value of the dollar grows so rapidly why wouldn't you buy as much as possible, as fast as possible?

Would you rather spend $950 on a Bitcoin NOW, or 30 dollars a day until February?

Jeesh.

[Hotcakes]

Very Interesting thank you for sharing Risto's data, I was just debating myself today about what option would be better. My conventional wisdom kept telling me to just go with DCA and let the market do the work. welp not anymore I guess.

[HairyMaclairy]

We are currently well above the generally accepted exponential trend.

*if* we revert to trend then a DCA could quite reasonably out peform an "all in" on day 1. It

I entered the market for the first time in early December when the cost was over $1k.  My dollar cost average is now in the $700s because I did not go all in at that time. Instead I bought all the way down from 800 to 500 during the last crash (I lost my nerve and walked away from the computer when it dropped into the 400s).

I will act more aggressively to further lower my dollar cost average if I get the chance. On the flipside I am largely comfortable with my current level of holdings if the price only goes up.

So no I don't fully accept the reasoning above.  It is more accurate to say "it depends".   My DCA was only over 1 month though.  If you are doing it over a year then I agree you will probably lose on average by delaying your purchases.  Unless bitcoin falls in value over the long term. Which is entirely possible. 

Your mileage may vary.

[Malte]

I agree- DCA protects you from paying a too expensive price at the cost of also not getting a "too cheap" price. But if you have an invenstment horizont of 1 year+ then you probably already think that the current price is "too cheap", so why sabotage these profits by DCAing?

Of course it could turn out other than expected, but if you don't assume that there will be geometric growth in price then a long term investment in bitcoin makes no sense anyway (too risky then).

What Risto showed that it is way more likely to miss huge profits by not DCAing.

[GigaCoin]

I learnt from multiple previous lessons that NEVER chase a stock or commodity or bitcoin UPWARDS, even if it feels you're missing out. Especially if you're slightly late to the take off. Better strategy for me if i missed the take off that worked is to be super patient, have some fiat ready and wait for a massive Dip, then accumulate on the dip. In a strong bull market that still has some life in it this always worked as the price tends to quickly recover from the major dips or stabilize close to where you bought and then take off in a few weeks or months.

this doesn't work in a dying market, as the price will continue to go downwards on the long run, which i don't believe Bitcoin is dying.

[HairyMaclairy]

I learnt from multiple previous lessons that NEVER chase a stock or commodity or bitcoin UPWARDS, even if it feels you're missing out. Especially if you're slightly late to the take off. Better strategy for me if i missed the take off that worked is to be super patient, have some fiat ready and wait for a massive Dip, then accumulate on the dip. In a strong bull market that still has some life in it this always worked as the price tends to quickly recover from the major dips or stabilize close to where you bought and then take off in a few weeks or months.

this doesn't work in a dying market, as the price will continue to go downwards on the long run, which i don't believe Bitcoin is dying.

Not trying to be argumentative but if you do not yet have any stake sometimes you have to chase the market. There is real doubt whether the patient bears that didn't chase at 300 will get back in.

Very different for someone with an established position.

[BitchicksHusband]

I've done a historical trend and Sundays tend to be the lowest (the "weekend dip" seems not to be a myth completely although it doesn't happen every weekend).  But I always recommend:

Buy immediately as much as you can afford to be without.

[piramida]

Two things. First of all, time consuming - having to spend some time every day doing a $35 transfer. Second, bitcoin is volatile. So I'd buy part now, and wait until a better opportunity with the other parts. For example, you should have been buying all the second half of December, and may take a pause now that the price is running up. If the downtrend continues, you buy again.