Ho, ho, HO-DL! This is what Bitcoin loyalists should think about, referring to the talent of investors in digital assets to cling to bitcoins, or HODL-ing, through the ups and downs, during the particularly strong holiday trade for the world’s number 1 digital currency.
Bitcoin prices were breaking records over the Christmas weekend as investors looked to close a historic 2020 for the world’s largest cryptocurrency, amid a global pandemic.
A bitcoin was trading briefly with a record high of $ 27,000, the last check on Sunday afternoon on CoinDesk, after hitting a historic peak of about $ 25,000 around the Christmas trading period. Bitcoin BTCUSD,
trade never sleeps.
Bitcoin prices have gained more than 276% so far in 2020. By comparison, the DIA Jones Industrial Average DJIA,
has risen close to 6% in 2020, the S&P 500 SPX index,
has gained almost 15%, while the Nasdaq Composite Index COMP,
so far it has risen by almost 43%.
Fans of virtual currency point to the growing attention of institutional investors and major companies, who now consider decentralized currency as a legitimate asset or at least a possible hedge against valuations in other parts of the financial markets, including US dollar.
In fact, rising Bitcoin prices, after an epic fall three years ago, occur when the US dollar has been making a steady decline that some attribute to the belief that someday digital assets will replace fiat currencies. like dollars. Bitcoin is considered by many to be a protection against the devaluation of the dollar, which was part of its genesis in 2009, following the economic slump caused by the 2008 financial crisis.
Naysayers warns that bitcoin is an air-based technological innovation and will likely be regulated out of existence at some point if it doesn’t collapse.
However, this has not stopped enthusiasts from declaring the current bitcoin rally as just the beginning of a deeper change in the financial markets.
PayPal PYPL,
has recently allowed users of its platform to buy bitcoins as well as other crypto brothers like ethereum ETHUSD,
Bitcoin Cash BCHUSD,
and Litecoin LTCUSD,
Square SQ,
The popular Cash app also allows users to buy and sell bitcoins.
On Saturday, Tim Draper, a start-up investor who made his name in Silicon Valley for successful investments in companies like Skype and Twitter Inc. TWTR,
and some notable unsuccessful investments in Theranos, predicted, via a tweet, that bitcoin prices would experience 10-fold growth from current levels in 2022 or 2023.
The billions that governments and central banks have spent so far to combat the economic crisis caused by COVID-19 has also been seen as support for the rise of digital assets such as bitcoin.
One of the most tempting questions that has arisen in the financial markets is to model the portfolio: does bitcoin fit into the portfolio of an average investor and, if so, in what proportion?
The truth is, no one really knows.
Many advisors suggest that only those who have the financial resources to bear a substantial loss should even consider the possibility of entering digital assets. And even then, bitcoin is considered an asset that should make up a small part, between 1% and 5% of an overall portfolio.
Read: Opinion: Why the only place you should invest in bitcoin is in your IRA
“While I’m not sure what to make of this parabolic move to bitcoin (when I talk to people, I’ve been of the opinion that bitcoin may play a small role in your portfolio, although it should be as highly speculative and not as currency), ”Peter Tchir, head of market strategy at Securities Academy, wrote in a weekend research note.
He added that the measure of Bitcoin, as with many assets in the financial markets, could increase due to very low interest rates and the fear of losing, or FOMO, with investors raising the price of an asset. which have not been the first adopters.
The researcher also said that individual investors, who use popular investment apps like Robinhood, could be behind the Bitcoin rally, making profits equally vulnerable to a major setback as observed in 2017, when the asset knocked on the door of the trade at $ 20,000 only to fall to a low of around $ 3,000 before beginning a sharp 36-month rise.
“Or maybe people see that ‘Robinhood’ traders have changed their daily price, the option fueled speculation towards bitcoin (which, given the number of ads I have on ‘parlaying’ sports betting , should not be discounted) “, wrote Tchir.
At its core, Bitcoin is a software tool that allows anyone to memorize transactions in an immutable digital book. So-called bitcoin miners solve complex puzzles or cryptograms that require an excessive expenditure of computing power and help confirm transactions, and miners are rewarded with bitcoins for this effort.
This technology avoids double spending, in theory, and anonymizes users, which is why critics argue that its main use is money laundering and corruption.
Originally, a bitcoin was only worth a fraction of a penny, but its movements have been stratospheric over the past 11 years, as demand has increased from both major users and new corporate and individual participants, making a revolution in the financial markets are close.