Dollar-cost Averaging Bitcoin Would’ve Saved El Salvador $18M

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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. 

Bukele’s bitcoin buys are highlighted in green | Source: NayibTracker

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.

We are buying one #Bitcoin every day starting tomorrow.

— Nayib Bukele (@nayibbukele) November 17, 2022

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 toreceive 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%.

Chart by David Canellis

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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