In the world of cryptocurrency news, the term HODL was coined in the altcoin sphere in 2013 according to UrbanDictionary.com. It carries the same meaning as the investment term ‘hold’ when it comes to keeping a stock that may be declining in value.
A recent Bitcoin analysis piece on CCN.com delved into Fundstrat’s Thomas Lee’s investing stance on the popular cryptocurrency. CCN refers to him as the ‘emerging voice of reason’ for cryptocurrency investors. Many of these investors have been shaken by Bitcoin’s steady decline in trading in recent weeks. Even more concerning is the lack of any clear direction as to where these declining values go from here.
Lee was the former chief equity strategist at JP Morgan Chase. He has been using his experience in the stock market to apply the same form of investment logic to the path that Bitcoin has taken with investors. He has described the market as “challenging’ because of the relatively short history of
investing and trading cryptocurrencies. Compounding the issue is the fact that bitcoin trading has produced most of its annual return in a two-week time frame each year it has been traded.
Tom Lee goes on to add in the CCN piece that he believes that investors should continue to buy in with prices set so low. He directly stated, “We think that investors should be patient buyers of bitcoin here. Market timing is discouraged in traditional equity investing. If an investor missed out on the ten best days (for S&P) each year, the annualized return drops to 5.4 percent from 9.2 percent. In other words, the case for buy and hold in equities is the opportunity cost of missing out on the ten best days.”
This same concept can be applied to bitcoin trading for investors trying to time the market. If you miss the ten best days of the year in this scenario, you would be losing as much as 25 percent in annualized returns according to a Fundstrat report obtained by CCN. Furthermore, the numbers bear this out over the past five years Bitcoin has been traded.
The current downward pressure on bitcoin trading is a real market condition. It is struggling to rise above the USD 8,000 level after trading as high as a USD level above 11,500 in recent months. The 8000 level is recognized as being the breakeven price for BTC mining according to Fundstrat. Also, this is not all bad news for investors. Analysts at Fundstrat went on to add, “The overhang from regulatory risk is keeping investors sidelined. However, we see positive catalysts for Bitcoin later in 2018, including the clarification of regulatory hurdles.”
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Fundstrat also added some investment insight into altcoins as an alternative form of cryptocurrencies in this same report. The overall consensus was a waiting period between 150 to 175 days before an increase in altcoin’s depressed price would take place. The much stronger bitcoin trading market should benefit from “more established blockchains growing” as well as increased “upside for $ETH and BTC.”