Ho, ho, HO-DL! This is what bitcoin believers need to think about – referring to the skill of digital asset investors to hold on to bitcoins or HODL-ups through ups and downs – during particularly dynamic holiday transactions for digital currency no. 1 in the world.
Bitcoin prices were heartbreaking records over the Christmas weekend, as investors looked to close a historic 2020 for the world’s most prominent cryptocurrency, amid a global pandemic.
A single bitcoin traded briefly at a record high of $ 27,000 at the last check on Sunday afternoon on CoinDesk, after hitting a historic high of about $ 25,000 during the Christmas trading period. Bitcoin BTCUSD,
trade never sleeps.
Bitcoin prices have gained more than 276% so far in 2020. By comparison, Dow Jones Industrial Media DJIA,
increased by almost 6% in 2020, the S&P 500 SPX index,
gained almost 15%, while the Nasdaq COMP Composite Index,
it has risen by almost 43% so far.
Virtual currency fanatics are drawing increasing attention from institutional investors and mass companies, which now see either decentralized currency as a legitimate asset or at least potential hedging against valuations in other parts of the financial markets, including the US dollar.
Indeed, rising Bitcoin prices, after an epic decline three years ago, come as the US dollar organizes a steady retreat that some attribute to the belief that digital assets will one day replace fiat currencies, such as dollars. Bitcoin is seen by many as a hedge against the devaluation of the dollar, which was part of its genesis in 2009, following the economic massacre caused by the 2008 financial crisis.
Naysayers warns that bitcoin is a technological innovation backed by thin air and is likely to be regulated out of existence at some point if it does not collapse.
However, this did not stop enthusiasts from declaring the current bitcoin rally as just the beginning of a deeper change in the financial markets.
PayPal PYPL,
recently allowed users on its platform to buy bitcoin, as well as other crypto sisters, such as ethereum ETHUSD,
Bitcoin Cash BCHUSD,
and Litecoin LTCUSD,
SQ square,
The popular Cash app allows users to buy and sell bitcoins.
On Saturday, Tim Draper, a startup investor who made his name in Silicon Valley for successful investments in companies such as Skype and Twitter Inc. TWTR,
and some remarkably unsuccessful investments in Theranos, predict, through a tweet, that bitcoin prices will increase 10 times compared to current levels until 2022 or 2023.
The trillions spent so far by governments and central banks to combat the economic crisis caused by COVID-19 have 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 one of portfolio modeling: does bitcoin fit into the portfolio of an average investor and, if so, in what proportion?
The truth is, no one really knows.
Many advisers suggest that only those with the financial means to withstand a substantial loss should even consider involvement in digital assets. And even then, bitcoin is seen as an asset that should be a small part, between 1% and 5% of a global portfolio.
Read: Opinion: Why the only place you should invest in bitcoin is in the IRA
“Although I’m not sure what to make of this parabolic movement in bitcoin (when talking to people, I was of the opinion that bitcoin may have a small role in your portfolio, although it should be treated as very speculative and not a currency)” , Wrote Peter Tchir, head of market strategy at Academy Securities, in a weekend research note.
He added that the Bitcoin movement, as with many assets in the financial markets, could be on the rise due to super-low interest rates and the fear of losing, or FOMO, as investors raise the price of an asset they do not have. were early adopters.
The researcher also said that individual investors, who use popular investment applications such as Robinhood, could be behind the bitcoin rally, making gains just as vulnerable to a major withdrawal, as observed in 2017, when the asset knocked on the door of the trade. at $ 20,000 just to get down to around $ 3,000 before starting a 36-month increase.
“Or, perhaps, people believe that ‘Robinhood’ traders have moved their day-to-day transactions, the option has fueled speculation about bitcoin (which, given the number of ads they receive on sports betting ‘should not be reduced ) ”, Wrote Tchir.
In essence, bitcoin is a software tool that allows anyone to store transactions on an immutable digital register. The so-called bitcoin miners solve complex puzzles or cryptograms that require excessive computing power and help confirm transactions, and miners are, in turn, rewarded with bitcoin for this effort.
This technology prevents double spending, in theory, and anonymizes users, which is why critics say its main use is for money laundering and corruption.
At birth, a single bitcoin was worth a fraction of a cent, but its movements have been stratospheric over the past 11 years, as demand has grown from both regular users and new corporate and individual entrants, who claim that a revolution in the markets financial are at hand.