Is 'Buy and Hold' the Best Bitcoin Investment Strategy
As cryptocurrencies become more and more popular, the issue of price fluctuations seems to become more pronounced (or at least more often the source of complaints). Even the most stalwart of cryptocurrencies, including Bitcoin, Ethereum, and Ripple, suffers from serious volatility concerns. Prices of these and other digital currencies have dipped by 20% or more on at least two occasions in the past two weeks. On the other side of the proverbial coin, these three currencies in particular have made incredible gains since the beginning of the year, with Ethereum and Ripple in particular gaining in price at a rate of up to 40 times in just months. What are investors to do about the issue of price fluctuation in the digital currency space? At least some analysts are suggesting that a buy-and-hold strategy may be the most effective.
More Users and More Transactions Means Easier Panic?
One theory, put forth in a post on Cryptocoinsnews, suggests that a decongesting of the Bitcoin network may have enabled users to move their coins more quickly. While this would normally be seen as a positive thing, it also allows for users to sell off their assets more easily when a panic hits the field. When this happens, prices can drop precipitously in just minutes. But are those users who are so quick to dump off their Bitcoin holdings being a bit too brash
On the other hand, there is an argument for buying and holding on to your Bitcoin or other digital currency assets. P.H. Madore suggests that, unless a user needs to redeem his or her coins or tokens for fiat currency to make an impending purchase, those currencies are still present and easily accessible. "They’re not IOU tokens like your fiat dollars," says Madore. Beyond that, the fact that many digital currencies are actually quite difficult to spend in real-world settings means that there is even less of a reason to make a quick sale if prices seem to be dipping. Although more brick and mortar stores are adopting methods of accepting cryptocurrency payments, the real world is still quite a ways away from the virtual one in this regard.
Perhaps most importantly, though, over the past several months at least, those users who have remained calm in the face of sell-off panics have generally been those who have profited the most as a result. Bitcoin and Ethereum prices have dipped, but they have also skyrocketed at other times. Madore continues, "you can panic with the rest or you can hold. Over the long-term, those who’ve held through the worst of the Bitcoin price panics have profited the most handsomely." The end result is that the price of one Bitcoin today is nearly triple what it was at the beginning of the year. Yes, there are concerns about a cryptocurrency bubble. But many investors have seen success up until this point by avoiding the panic and sitting tight with their digital currency investments.