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Should you HODL Bitcoin?

by SuperiorInvest

The term “HODL” began as a typo of the word “hold.” It appeared on a bitcointalk.com forum, and the crypto community found it so funny that they began using “HODL” as a term to denote holding (rather than selling) the cryptocurrency itself.

Key takeaways

  • “HODL” was originally a typo intended to indicate “holding” the cryptocurrency.
  • Bitcoin, in particular, has been known for wild fluctuations in price and volatility, making the decision to HODL more challenging.
  • Increasingly negative sentiment and scandals justify the sale of bitcoins.

The ups and downs of Bitcoin

Bitcoin brought seasonal joy to investors when its price accelerated and broke records in December 2017. The skyrocketing rise in its price caused bitcoin enthusiasts to make wild predictions about its price in the future. Their forecasts were much bleaker in March and April 2018. The cryptocurrency’s price was down more than two-thirds from its December 2017 peak and fell to $3,237 in December 2019, a decline of about 83%. On November 11, 2021, Bitcoin hit an all-time high of $68,789 before ending the day at $64,995. Two years later, the cryptocurrency’s end-of-day price was near $34,700 after spending some time in the $25,000 range.

Bitcoin is therefore well known for its wild price fluctuations, a volatility that investors have come to expect. But that doesn’t make him any less anxious when it comes to money. Bitcoin price movements sometimes force investors to reconsider their opinions and positions. Here is a brief summary of the bull and bear cases for bitcoin.

The bearish case for Bitcoin

A constant stream of hacks and scandals within the cryptocurrency ecosystem has ensured that the currency’s reputation as a venue for criminal activity persists. There have been many notable examples, from Silk Road to the FTX Exchange scandal. Bitcoin investors seem to take it all in stride and continue to trade during massive price spikes and drops.

The introduction of bitcoin futures and the influx of institutional money into its ecosystem was supposed to reduce volatility, but a quick look at the price swings shows that it didn’t help much.

Regulators and economists around the world have turned up the heat by criticizing Bitcoin in public forums. His stance has made governments cautious about legalizing bitcoin. Globally, regulatory agencies have introduced or are developing laws regarding cryptocurrencies and cryptoassets, fueling the bullish stance that cryptocurrencies are falling.

Bitcoin’s high transaction fees were considered an impediment to mass adoption, but fell after the community introduced network upgrades, although they may still be high due to congestion. Technological solutions, such as the Lightning Network and the Taproot upgrade, were supposed to be a remedy for Bitcoin’s scaling problems because they speed up the network. However, bears remained skeptical after the Lightning network did not achieve widespread adoption on many large and popular platforms until 2022. As of 2023, exchanges such as Binance and Coinbase have completed or announced Lightning integration, so it remains to see how the bears will react. .

The Bull Case for Bitcoin

The main bullish argument for bitcoin is based on the virtues of patience. Bullish bitcoin investors point to the cryptocurrency’s previous price action as proof that the bitcoin price will rise again.

Large corporations are becoming increasingly involved in the space. Google, Meta (formerly Facebook), and X Corp. (formerly Twitter, Inc.) are among some of the big names that have decided to get involved in cryptocurrencies. Meta has relaxed its cryptocurrency advertising policies and the rest have started accepting cryptocurrency payments.

Actions taken by governments and regulatory agencies also indicate a thaw in cryptocurrency-related positions. Bitcoin futures ETFs introduced more liquidity into the Bitcoin ecosystem. Pressure from cryptocurrency investors on regulators may be causing leashes to loosen: Crypto fans declared victory in an appeal ruling against the Securities and Exchange Commission’s denial of spot EFT Grayscale Bitcoin in September 2023, and many expect one to be approved.

Technical advances within the Bitcoin network also point to a brighter future. The list of nodes accepting the Lightning Network is growing and, as noted, some large platforms, such as Coinbase, have decided to integrate it as well.

Who originated Bitcoin?

The creation of the original Bitcoin cryptocurrency in 2008 is attributed to one or several unknown parties using the made-up name of Satoshi Nakamoto. This person or entity gave the open source license to the developers in 2010.

What is cryptocurrency?

Cryptocurrency is a virtual currency that uses cryptography to channel secure transactions that can be recorded on a distributed ledger. Transactions can be “on-chain” or “off-chain,” depending on whether they are recorded on a ledger. Blockchain technology prevents cryptocurrency counterfeiting.

What are some other types of cryptocurrencies?

There are thousands of versions of cryptocurrencies besides bitcoin, including ether, dogecoin, and non-fungible tokens (NFTs), which have skyrocketed in popularity in 2021.

The bottom line

Bulls believe that the price of bitcoin is following a predictable pattern based on previous trends and that it will rise again. But bears point to the negative sentiment, regulatory issues and scandals associated with the original cryptocurrency to make the case for selling bitcoin.

The comments, opinions and analyzes expressed on Investopedia are for online informational purposes. Please read our warranty and disclaimer for more information. As of this writing, the author does not own bitcoins.

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