Bitcoin is undoubtedly one of the most talked-about cryptocurrencies in the world and apparently, it is undergoing a massive bull run in the offing. With each passing day, the hodling chapter of Bitcoin is picking more pace and has been actively validating the trading strategies of numerous crypto investors.
As per the Bitcoin Analysts, when the Bitcoin-US Dollar exchange rate reached an all-time high at $20,000, the HODL activities had already hit 2016 levels. Nevertheless, the existing sentiment rose right after the market crash in March, but the new statistics suggest that it has traversed to gain new heights in terms of crypto-asset accumulation.
Let us now rewind and help you understand from scratch.
What is Bitcoin Hodling?
According to the leading Bitcoin analysts, 60% of the total available Bitcoin (BTC) supply has not moved for a period of 1 year- a direct indication of that this 60% of the cryptocurrency is not being traded at all. This entire process is known as hodling- a term that was intended to mean holding but spells as such because of a typo error. The misspelled word caught on with the Bitcoin community and became a staple evocative term for the cryptocurrency’s functionality.
The market studies also suggest that the current levels of Bitcoin Hodling were last noticed in the bull run of $20,000 in 2017.
But now let’s just shift our bullish narrative away from hodling, it is even speculated that the investors might not be getting the best out of BTCs while only ingenuously holding the assets in terms of overall returns.
This leads us to answer an inevitable question.
Can just BTC hodling help the investors?
Considering Bitcoin’s previous data statistics, hodling assets is definitely profitable. And there is absolutely no doubt about it! Since Bitcoin ushered in the world of cryptocurrencies, it has been profitable for almost 98% of the time. It is, therefore, considerably fair to accept that a certain group of crypto investors would prefer to keep their BTC assets in the ideal gear and won’t touch it until anytime soon.
For instance, take a look back at the day when the term Hodling was first introduced. Bitcoin prices took a downfall of 24.67%, a portion of the 46% slide that occurred from December, 10 to December, 18.
However, since that time the Bitcoin’s rate increased to nearly 1338% of its initial value. If a person who coined HODL had invested $10,000 in BTC at that particular time, he would have assets worth $143,829 today! The figures are undeniably massive and Bitcoin Hodling has surely become an effective yielding trade strategy for the investors.
Now, coming back to the short term tradings, the investors can get the best out of BTC as well if they carry out a proper rebalancing.
For example, if BTC rates lowered or rose by 50%, instead of Hodling, it would be more sensible if traders sold BTC if their allocation reached 7.5% of their portfolio, or invest and buy more if the Bitcoin’s allocation slumps down to 2.5%.
This type of Symmetric rebalancing has proven to benefit the market earnings after the cryptocurrencies’ rise in 2017. The overall returns were up by 104% and involved much lower risks with respect to its volatility.
Can we apply it to the current market scenario?
We would absolutely say yes to it. Buying and holding is the only rational attempt to gain from an asset as popular as Bitcoin; where striving to tame the market is next to impossible. We would rather suggest BTC Hodlers not to sit idle.
Considering the volatility in its subdued levels at the current moment, just Hodling all your BTC assets seem less ideal in the existing market.
In order to manage a reasonable portfolio and to amplify the risk-adjusted returns, crypto Hodlers should systematically re-balance their portfolio over the course of time. The re-balancing approach encourages crypto investors to buy low and sell high, thus, maintaining their portfolio allocations in check. And since it is not 2017 anymore, we would suggest being on the kinder side of the digital industry. A calculated approach would yield better results as compared to the “all-in” approach in the BTC trading world.
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