Ho, ho, HO-DL! This is what bitcoin believers must be thinking – referring to the talent of digital asset investors to hold, or HODL-ing, bitcoins during the ups and downs – during the particularly dynamic holiday trade for the number 1 digital currency of the world.
Bitcoin prices broke records during the Christmas weekend, as investors sought to close a historic 2020 for the world’s most important cryptocurrency amid a global pandemic.
A single bitcoin was briefly traded at a record high of over $ 27,000 on the last check on Sunday afternoon at CoinDesk, after marking a historic peak at around $ 25,000 during the Christmas trading period. Bitcoin BTCUSD,
trade never sleeps.
Bitcoin prices have risen more than 276% so far in 2020. In comparison, the Dow Jones Industrial Average DJIA,
increased by almost 6% in 2020, the S&P 500 SPX index,
gained almost 15%, while the Nasdaq Composite Index COMP,
has increased by almost 43% in the year so far.
Virtual currency fanatics point to the growing attention of institutional investors and mainstream companies, who now see 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, the surge in bitcoin prices, after an epic decline three years ago, comes at a time when the US dollar is staging a steady pullback that some attribute to the belief that digital assets will one day replace currencies. trusts like the dollar. Bitcoin is seen by many as a hedge against the devaluation of the dollar, which was part of its genesis in 2009, in the wake of the economic carnage caused by the 2008 financial crisis.
Pessimists warn that bitcoin is a technological innovation sustained by nothing and is likely to cease to exist at some point if it doesn’t collapse spontaneously.
However, this has not stopped enthusiasts from declaring bitcoin’s current rise 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 sister crypts like 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 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, predict, via a tweet, that bitcoin prices will grow 10-fold from 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 a support for the rise of digital assets like bitcoin.
One of the most tempting questions that have emerged in the financial markets is that of portfolio modeling: does bitcoin fit into the portfolio of an average investor and, if so, in what proportion?
The truth is, nobody really knows.
Many consultants suggest that only those with the financial resources to support a substantial loss should even consider getting involved with digital assets. And yet, bitcoin is seen as an asset that should represent a small portion, between 1% to 5% of an overall portfolio.
Read: Opinion: Why the only place you should invest in bitcoin is in your IRA
“Although I’m not sure what to do with this parabolic move in bitcoin (when speaking to individuals, I feel that bitcoin may have a small role in its portfolio, although it should be treated as highly 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, may be rising due to super low interest rates and fear of losing, or FOMO, with investors raising the price of an asset that they were not the first to adopt.
The researcher also said that individual investors, using popular investment apps like Robinhood, may be behind the rise in bitcoin, making gains equally vulnerable to a major downturn, as was observed in 2017, when the asset knocked on the door of trade for $ 20,000 just to drop to a lowered about $ 3,000 before starting a laborious 36-month increase.
“Or, perhaps, people see that ‘Robinhood’ traders have switched their day trading, option fueled speculation to bitcoin (which given the number of ads I receive on ‘accumulating’ sports bets, should not be discounted),” wrote Tchir.
Basically, bitcoin is a software tool that allows anyone to memorize transactions in an immutable digital ledger. So-called bitcoin miners solve complex puzzles or cryptograms that require an extraordinary expenditure of computing capacity and help confirm transactions, and miners, in turn, are rewarded with bitcoins for this effort.
This technology avoids double spending, in theory, and makes users anonymous, which is why critics argue that its primary use is for money laundering and corruption.
At its birth, a single bitcoin was worth a fraction of a cent, but its moves have been stratospheric for the past 11 years, as demand has grown from both conventional users and new corporate and individual players, who argue that a revolution in the markets financial resources are close.