Long-term Bitcoin Hodling is a Good Strategy, says Wall Street Analyst

Thomas Lee is certainly no stranger to the world of finance be it mainstream or cryptocurrency. The former chief equity strategist at J.P. Morgan Chase is the only major Wall Street analyst to issue formal reports on the Bitcoin market. The co-founder of Fundstrat has been unequivocal in his stance that Bitcoin is going to bounce back from its current malaise, even going as far as to predict earlier in the year, a midyear price of Bitcoin in the $20,000 region and an end of year price of $25,000.

Speaking during an episode on CNBC’s Fast Money, Lee, who is the head of research at Fundstrat maintained that Bitcoin is still an attractive asset class. This is notwithstanding the intense pressure that Bitcoin has come under since the latter half of December 2017 all the way up to the present day. He highlighted the not so good mood that pervades the market right now, with investors worried that the prices might never go up again in the face of regulatory crackdowns and numerous hacks. He, however, maintained that Bitcoin remains a good store of value and is still the best cryptocurrency around.

Breaking Down the Analysis

The fundamental premise of Lee’s assertion is based on the observation that the total gains made by Bitcoin within a year are recorded during a handful of days. The Bitcoin market is incredibly volatile, prone to frequent price spikes and corresponding massive declines. As a result, the principle of “hodling” does present useful opportunities for investors to make good returns on investments. Lee used 2017 as an example wherein the price of Bitcoin increased by a factor of almost 20 from just under $1,000 in January to almost $20,000 in December. The full year return for Bitcoin during this period was achieved in a total of 12 days.

Lee has discovered that in the past 5 years, the full-year Bitcoin gains were achieved in an average of about 9 days. Therefore “non-hodlers” of Bitcoin were more likely to lose as Bitcoin only has a few days of top performance scattered over the year. According to Lee, this isn’t unlike the situation that can be observed in the mainstream market as investors who didn’t hold S&P 500 stocks through the 10 best days of the market had their end of year gains declining from 9.2 percent to about 5.4 percent. However, it is important to point out that such a comparison might not be appropriate seeing as there is less than a decade of information available for the Bitcoin market compared to over 64 years of S&P 500 analysis.

Hodl

Lee’s advice to Bitcoin investors is to hodl, a term that came into use within the Bitcoin community after being used in a post that appeared on the Bitcointalk Forum in December 2013. Lee believes that Bitcoin investment requires patience as Bitcoin is a bull market and will recover from price slumps. Lee is encouraging potential investors to get in now while the price is down and for established investors to hodl on in order to earn huge returns at the end of the year.

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1 Response

  1. I think the Bitcoin price will surpass $20.000 in a few years so I’m thinking long term not tomorrow. There will be ups and downs and many will lose their cool and sell when it’s not time to do so and I’ll be there to buy :).

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