Analyst Thomas Lee proves it’s best to HODL
Whether or not to HODL (buy and hold) cryptocurrencies can be a tough decision for many crypto investors.
When the market is steadily rising, it makes total sense to HODL.
But when the waters turn rough, as they have for most of this year, the choice to HODL can be a difficult one.
Now, leading Wall Street analyst, Thomas Lee, has provided an evidence-backed case for HODLing in the long term.
What is HODLing?
The term “HODL” emerged from a misspelling of “hold” in an early Bitcoin Forum message.
Many speculated that the post was written by a Bitcoin trader who was thought to be drunk at the time.
The typo in the subject title said, “I AM HODLING.”
In 2017, Quartz listed the term as one of the essential slang terms in Bitcoin culture.
It described it as a stance, “to stay invested in bitcoin and not to capitulate in the face of plunging prices.”
The sentiment is often used in all cryptocurrency communities as a form of support during price drops when investors are tempted to sell, and would, therefore, lose money by selling at a low price.
Backed by science
But according to financial expert Mr. Lee, there’s more to the HODLing matra than just internet memes.
The head of research at Fundstrat Global Advisors said in a Wednesday report that HODLers are responsible for Bitcoin’s yearly gains.
Analysing Bitcoin with the eye of a stock investor, a Thomas Lee says BTC is an attractive buy while it remains under pressure.
Mr. Lee said in the report that annualized return would drop to 5.4 percent from 9.2 percent if an investor didn’t hold stocks through the ten best days for the S&P 500 each year.
Lee said Bitcoin HODLing has a similar effect on the value for BTC, saying:
“The reason ‘buy and hold’ (or HODL) makes sense for BTC is that a handful of days each year account for the bulk of gains for BTC.
“For instance, in 2017, a total of 12 days represent the full-year return of BTC.”
Bitcoin’s epic rise over the last five years
Traditional equity market investors are advised to buy and hold stocks.
This is to avoid missing out on price gains by trying to time trades during price fluctuations.
Lee has discovered that in the last five years, Bitcoin achieved its full-year gains in an average fo just nine days.
He says this matches the analysis for the S&P 500’s performance that dates back to 1954.
In 2017, Bitcoin’s value multiplied 13 times over, according to Coinmarketcap data.
In the first few months of 2018, however, BTC’s price has struggled to pass $8,000.
By looking at Bitcoin’s past performance, it’s clear to see that those who didn’t HODL long term would have suffered.
According to Mr. Lee, Bitcoin has fallen 25 percent annually from 2013 to 2017, if you exclude its top ten days of performance every year.
The top Wall St advisor added that Bitcoin investors should HODL through the tough times, saying:
“We think investors should be patient buyers of BTC here.”
Before co-founding Fundstrat in 2014, Thomas Lee was chief equity strategist at J.P. Morgan Chase.
In July 2017, he issued his first formal report on Bitcoin and remains the only Wall St strategist to do so.
In his report, Lee maintains his mid-year Bitcoin price target of $20,000 and $25,000 by the end of the year.