It’s been just over two months since automating buying Bitcoin (BTC) without creating a costly mess of small transactions. If you’re a Kiwi looking to dollar cost average (DCA) into Bitcoin regularly, you may have come across the same issue that I did: how do you automate purchases without ending up with hundreds of tiny, expensive-to-move Bitcoin fragments?
My first foray into buying crypto was back in May 2022 with Easy Crypto (now Swyftx). The process was simple: sign up, complete KYC, provide a wallet address, buy Bitcoin, and done, it lands in your wallet. I didn’t buy a huge amount at the time, and the initial intent was to make regular buys whenever I had some free cash. Well, life lifed, and that didn’t happen.
I left it like that for a while and possibly missed out on massive gains had I just stuck to making regular buys. This is a good example of how not taking action right away leads to… well, inaction.
Just over a couple of months ago, I decided it was time to DCA into Bitcoin with a clear goal: automated, regular buys, low fees, straight to a self-custody (cold/hardware) wallet.
The UTXO Problem That Changed Everything
With all things involving money, it pays to do some research before diving in.
On the surface, the most logical option would have been using EasyCrypto’s auto-buy feature. But before setting it up, I thought back to a podcast (can’t remember which one) that touched on “Bitcoin dust”. This led me down a rabbit hole of research on unspent transaction outputs (UTXOs).
What Are UTXOs (And why should you care)?
UTXOs are chunks of Bitcoin in your wallet. Think of them as having a physical wallet with different denomination notes, eg. a couple of $5 notes, a $10 note, 3 $20 notes, a $50 note and a $100 note. When you want to spend Bitcoin, your wallet combines these UTXOs to make up the amount you need. When you spend BTC, your wallet combines UTXOs to make up the total amount needed.
Here’s the catch: each UTXO in a transaction adds to the transaction fee. So if you’ve been making lets say a $35 Bitcoin purchase every week for a year, you could end up with 52 separate UTXOs. When you eventually want to move or spend that Bitcoin, you’re potentially paying fees on all 52 pieces.
To get a more in-depth explanation on UTXOs and why they matter, take a look at this video from Trezor:
Hopefully the video made UTXOs make a bit more sense and why many UXTOs can become a headache later down the line. Two main issues stood out for me:
- If network fees go high, very small UTXOs could become unspendable (the fee to spend them is more than the value they hold)
- If you have to transact with a bunch of smaller UTXOs, it pushes up the total transaction fee (each one comes with its own fee which all add up)
This left a big question: how do you set up a DCA workflow that avoids ending up with a high number of small, potentially costly UTXOs?
Finding a New Zealand Friendly Bitcoin DCA Workflow
I asked around in various NZ and overseas crypto communities. The consensus? Buy on an exchange, let the balance build up, then transfer to cold storage in larger chunks.
I asked around in various NZ and overseas crypto communities. The most frequently suggested method was: buy on an exchange, let the balance build up, then transfer to cold storage in larger chunks.
Simple in theory. But that opened a whole new can of worms:
- Which exchange has the best rates for Kiwis?
- What’s “large enough” for a transfer?
- What about network fees?
- Which cold storage wallet?
- And about a dozen other considerations…
After comparing Binance, Pay It Now, Lightning Pay, and Swyftx (with their various fees, security features, and NZ accessibility), I landed on this workflow:
Lightning Pay NZ → Strike → Trezor
Let me break down why.
Lightning Pay NZ (The Entry Point)
Lightning Pay is a NZ financial service that lets Kiwis buy Bitcoin with funds sent directly to your Lightning wallet. Because transactions happen on the Lightning Network (not Bitcoin’s main network), fees are tiny.
The numbers: 1% fee + $0.20 bank fee (if using Akahu). Compare that to Swyftx’s third-party payment provider fee of 1.99% + up to 4% spread (as at [current date]). For regular DCA, those percentage points add up fast.
Strike (The Aggregation)
Strike acts as a Lightning wallet. Since transactions on the Lightning Network are very cheap, this is where my small, regular DCA buys aggregate. Strike is custodial, so it’s essentially acting as a temporary exchange until I withdraw. Strike has an auto-withdraw feature which is triggered once your balance reaches a set threshold.
The goal is to let the small buys accumulate here until the balance is big enough to justify the final, single on-chain transfer to my cold wallet. This on-chain transfer is unavoidable but should ideally be done during low fee periods (always check Mempool for network conditions).
Trezor (Cold Storage – Final Destination)
For my ultimate storage solution, I chose Trezor for a bunch of reasons which include:
- Self-custody: Not your keys, not your coins (as the saying goes)
- Cold storage: Full control, offline security
- Open source: Transparency builds trust
- Reputation: World’s first hardware wallet, still going strong
- Ease of use: Important when you’re dealing with serious money
If you’re ready to embrace true self-custody and put the SET & FORGET plan into action, you can get 10% off your first Trezor order via Trezor (and yes, that gives me a small reward too, win-win).
Since setting it all up, it has been a SET & FORGET thing. The only time it comes to mind is when I receive emails and notifications from Lightning Pay NZ and Strike confirming the autobuy and payment receipt.
This workflow solved my DCA problem: regular Bitcoin purchases with minimal fees, no UTXO headaches, and secure cold storage. It took some research to figure out, but now it’s ticking along just fine.
Are you dollar cost averaging into Bitcoin? What’s your workflow? Have you run into the UTXO issue?
Share your setup in the comments!
Disclaimer: This is not financial or investment advice. I am not a licensed financial adviser. I share my own experiences and research for informational purposes only. Always do your own research before making financial decisions and, if needed, seek professional advice from a qualified financial adviser in your country.
No comments yet.