Ho, ho, HO-DL! That’s what bitcoin believers have to think – referring to the skill of investors in digital assets to hold or HODL bitcoins through the ups and downs – during particularly vibrant holiday trading for the world’s # 1 digital currency.
Bitcoin prices shattered records over Christmas weekend as investors watched a historic 2020 shutdown for the world’s most prominent cryptocurrency amid a global pandemic.
A single bitcoin was traded briefly at a record high of over $ 27,000, finally check out on CoinDesk Sunday afternoon, after hitting a historic peak around $ 25,000 around the Christmas trading period. Bitcoin BTCUSD,
trade never sleeps.
Bitcoin prices are up more than 276% so far in 2020. In comparison, the Dow Jones Industrial Average DJIA,
has risen nearly 6% in 2020, the S&P 500 index SPX,
up nearly 15%, while the Nasdaq Composite Index COMP,
is up nearly 43% so far.
Virtual currency fanatics point to the growing attention from institutional investors and mainstream businesses, who now view the decentralized currency as a legitimate asset, or at least a potential hedge against valuations in other parts of the financial markets, including the US dollar.
Indeed, bitcoin’s skyrocketing prices, following an epic drop three years ago, come now that the US dollar has made a steady retreat that some attribute to the belief that one day digital assets will replace fiat currencies like money. Bitcoin is seen by many as a hedge against the dollar devaluation that was part of its inception in 2009, in the wake of the economic carnage wrought by the 2008 financial crisis.
Naysayers warn that bitcoin is a technology innovation backed by thin air and will likely be regulated at some point if it doesn’t collapse on its own.
However, that hasn’t stopped enthusiasts from declaring the current bitcoin rally as just the beginning of a deeper shift in the financial markets.
PayPal PYPL,
recently allowed users on its platform to buy bitcoin as well as other sister cryptos such as ethereum ETHUSD,
Bitcoin Cash BCHUSD,
and Litecoin LTCUSD,
Square’s SQ,
The popular Cash app also allows users to buy and sell bitcoins.
On Saturday, Tim Draper, a startup investor making a name for itself in Silicon Valley with successful investments in companies like Skype and Twitter Inc. TWTR,
and some notable unsuccessful investments in Theranos, predict via a tweet that bitcoin prices would see 10x growth from current levels in 2022 or 2023.
The trillions spent so far by governments and central banks to combat the economic crisis triggered by COVID-19 are also seen as a support for the rise of digital assets such as bitcoin.
One of the more tantalizing questions that has surfaced in the financial markets is portfolio modeling: does bitcoin fit into an average investor’s portfolio, and if so, in what proportion?
The truth is, no one really knows.
Many advisers suggest that only those who have the financial resources to withstand a significant loss should even consider working on digital assets. And even then, bitcoin is seen as an asset that should make up a small portion, between 1% and 5% of a total portfolio.
Read: Advice: 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 in bitcoin (when speaking to individuals, I believe bitcoin can play a small role in your portfolio, although it should be treated as highly speculative and not currency).), ”Peter Tchir, head of market strategy at Academy Securities, wrote in a weekend note.
He added that, as with many assets in financial markets, bitcoin’s move could rise due to super-low interest rates and a fear of missing out, or FOMO, with investors pushing up the price of an asset that they are not early adopters of. have been.
The researcher also said individual investors using popular investment apps such as Robinhood could be behind bitcoin’s rally, making profits as vulnerable to a major downturn as was seen in 2017, when it actively knocked on the door for $ 20,000 to then to a low of around $ 3,000 before staging a floundering 36-month rise.
“Or maybe people think the ‘Robinhood’ traders have moved their day trading, option fueled speculation to bitcoin (which shouldn’t be discounted given the amount of ads I’m getting on parlaying sports betting),” Tchir wrote. .
At its core, bitcoin is a software tool that allows anyone to rethink transactions on an immutable digital ledger. So-called bitcoin miners solve complex puzzles or cryptograms that require too much computing power and help confirm transactions, and miners are in turn rewarded with bitcoins for that effort.
This technology prevents double spending in theory and anonymizes users, which is why critics argue that its primary use is for money laundering and corruption.
In its nascence, a single bitcoin was worth a fraction of a cent, but its moves have been stratospheric for the past 11 years as demand has risen from mainstream users as well as new businesses and individual participants, who are advocating a revolution in financial markets. near.