When BTC Embraces DeFi, Data Comparisons Show You How to Optimize Your Bitcoin DCA?

Bitcoin DCA is a very profitable strategy

Dollar-cost averaging (DCA) is defined as purchasing at determined intervals regardless of price and has proven to be one of the most effective and safest ways to accumulate bitcoin, especially for long-term Bitcoin holders because the nature of DCA is that the price against “paper currency” is illusory, as the paper currency inevitably keeps depreciating, whilst the core assets will invariably appreciate.

As Hass McCook explained in “How The DCA Army Will Drive A $1 Million Bitcoin Price,” Bitcoin DCA can mitigate the volatility of BTC and make it easier for people to benefit from these kinds of savings, which means not only is DCA beneficial to Bitcoin investors’ net worth, but it is also beneficial to Bitcoin, i.e. if there are enough people doing auto-DCA, it will casually eat away at the total bitcoin supply.

He also offered the following data:

If you had invested $10 per day in DCA into Bitcoin starting on August 12, 2017, you would have invested a total of $14,610 by August 19, 2021. The total value of the money saved in Bitcoin would have been $84,506, or about 1.82 BTC. A total return of 478.41%.

If you had been putting $100 per week in DCA since August 12, 2017, you would have invested a total of $20,900. Today, the total value of that money would have been $115,718, or about 2.49 BTC. A total increase of 453.68%.

If you were to have spent $1,000 in DCA into Bitcoin every month, you would have invested a total of $48,000. Today that money would be worth $200,066, or about 4.31 BTC. That’s a total increase of 316.81%.

In the long-term equilibrium state, the price of Bitcoin in fiat currency would be defined by the Bitcoin Army (meaning those who make Bitcoin more useful and accessible to others by actively buying, mining, educating, promoting, and making it more accessible by developing and building products), as the amount of fiat currency put on the market each day minus the miners’ allowances (coins mined plus fees). Eventually, the amount of fiat currency would convert to Bitcoin in astronomical amounts, and that fiat currency would cease to exist.

Bringing BTC into DeFi has led to a better solution for Bitcoin DCA

Bitcoin DCA can help investors efficiently accumulate Bitcoins and enjoy beta gains in the highly volatile crypto market, while with the growth and expansion of the overall market, many Bitcoin holders have started to wonder how they can also make alpha gains outside the gains of Bitcoin itself.

However, due to the non-programmable nature of the Bitcoin network, it cannot be used effectively to support the development of all types of applications, especially financial applications, so for a long time, the only options for Bitcoin holders were the financial services of some centralized platforms, i.e., depositing Bitcoins to earn interest income. But any centralized platform carries the risk of non-redeemability, no matter how high a reputation it has built up, and at the same time, the APYs that most of these platforms can offer are only around 3%, making it difficult to meet investors’ expectations for returns, let alone risk the security of their assets.

Various innovations in financial applications on the Ethereum network and other smart contract chains, as well as the successful adoption of Bitcoin-pegged tokens, have provided investors with more options to capture the additional benefits of Bitcoin in the DeFi world. However, to date, no protocol has been able to help Bitcoin holders earn as high a return as other mainstream assets. There might be very few projects that offer a high APY for a short period of time, but the design of their system mechanism dictates that this APY is unsustainable, and therefore not an underlying investment for the long term.

In the article of Introducing SatoshiDAO, we analyzed in detail the financial dilemma that long-term Bitcoin holders face, and how SatoshiDAO hopes to break through this dilemma and fulfill its vision of “Making BTC the Centre of the DeFi world”.

How to achieve this? We described the system mechanisms in detail in the article of How does SatoshiDAO works? In short, SatoshiDAO accumulates value and realizes the purpose of the tokens circulating in the system, i.e., SATO, through two main mechanisms: Staking and Bonding. The (3,3) model incentivizes staking behavior, which at the same time brings project growth, stability, and a high APY, and further results in a positive feedback loop. In SatoshiDAO, we convey the consensus that the more SATO tokens a participant has, the more Bitcoins he locks up, and the more he gets in return through staking. Whereas the logic behind Bonding is to replace the traditional liquidity mining scheme with the protocol-owned liquidity, where projects no longer need to sacrifice ownership in exchange for temporary liquidity.

At the same time, we further argue that the combination of DeFi’s advanced tokenomics model in SatoshiDAO, on top of the DCA strategy, can provide more desirable returns to investors who consider Bitcoin a core asset and who recognize the long-term value of Bitcoin.

Simulated backtest tables for three time periods of BTC DCA vs. SATO DCA

In order to corroborate the above theory, we conducted a simulation to measure the return on the same amount of Bitcoin and SATO DCA monthly over three different time periods. The conclusion is that if you started investing in BTC and SATO from June 1, 2021, January 1, 2021, and January 1, 2018, respectively, the returns from investing in SATO are higher than investing in BTC as of December 17, by 192.14%, 567.87%, and 1,960,624.38% respectively. The reason for choosing different times for the starting points was to try to cover different Bitcoin price change intervals.

The following are the specific data measured:

• The assumption made is that 1% of the group who conduct BTC DCA end up participating in SATO DCA, the SATO price trend will be similar to the BTC price trend.
• Putting 10,000 USD in BTC DCA and SATO DCA on the 1st of each month.

- If the start date of DCA was June 1, 2021, the total position of BTC DCA would have been 74,830.94 USD as of December 17, 2021; the total position of the SATO DCA would have been 218,614.07 USD.

-The changes in positions are shown in the chart below:

-Detailed data are as follows:

-If the start date of DCA was January 1, 2021, the total position of BTC DCA would have been 132,654.51 USD as of December 17, 2021; the total position of SATO DCA would have been 885,936.87 USD.

-The changes in positions are shown in the chart below:

-If the start date of DCA is January 1, 2018, the total position of BTC DCA would have been 2,399,732.42 USD as of December 17, 2021; the total position of the SATO DCA would have been 47,052,138,481.00 USD

-The changes in positions are shown in the chart below:

In the long run, this compounded interest on staking will lead to exponential growth in the SATO balances of system participants, and even if the price remains completely unchanged during this period, the returns accruing to investors will still be significant.

Thank you for taking the time to read this article. Join us on our social media to be informed about the launch of SatoshiDAO!

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WAGMI.