Is Bitcoin a Good Investment? Does Hodl Work?

[mikeywith]

Looking at how "bad" the past 2 years have been for bitcoin, and out of curiosity and because many people don't know if Hodling does or doesn't actually work, I have decided to make an excel sheet and see if Hodling does work for the course of long period of time.

In this study, I imagine average Joe who joined the bitcoin market right at the peak (17/12/2017) and bought his first BTC for $20,089.00, average Joe bought the same amount of bitcoin every month from that time to (17/12/2019) or a total period of 2 years.


Buying Monthly at

Open = $7,621.34
High =  $9,317.24
Low  = $6,297.66
Close= $7,510.18


Average = $7,686.61



Buying Weekly at

Open = $$7,708.47
High =  $8,268.48
Low  = $6,991.72
Close= $7,595.04


Average= $7,640.93



Buying Daily at

Open = $7,669.29
High = $7,855.83
Low  = $7,439.93
Close= $7,652.44

Average= $7,654.37


Taking the monthly statistics, assuming that Joe started after the peak by

1 month  : $7,452.68
2 months :$7,227.29
3 months :$7,121.50
4 months :$7,039.00
5 months :$6,987.10
6 months :$6,913.94


Taking the monthly statistics, assuming that Joe started before the peak by

1 month  : $7,714.05
2 months :$7,630.02
3 months :$7,513.14
4 months :$7,387.53
5 months :$7,230.89
6 months :$7,082.91


Bitcoin now sits at about 7300$, which means on the average, Joe now is close to break-even point.

with a bit of luck Joe could have sold on July 2019 (5 months ago), at the point his average cost would have been $7,465.47 while the average selling price of that month would have been $10,350.89 and would have made + 38% profit on his investment.

With a bit of bad luck Joe could have sold on Feb 2019, the average cost would been $7,766.56 and sold for $3,729.25 making a loss of - 51.9%.


There is no right answer for this, it pretty much depends on what Joe was going to do with that money if not invest it in bitcoin in the first place. Timing is also crucial, by ignoring the two last scenarios that are based on pure luck, Hodling seems to perform well IMO, if joining around the peak keeps you close break-even, joining at the right time or just far enough from the peak- will most likely put you in profit over a long enough period of time.





Price history data I used can be found on Finance.Yahoo

[LFC_Bitcoin]

If you’re looking for short term profits then bitcoin might not be a great investment. It’s a very volatile asset & you could lose a lot of money.

Nobody ever HODLED long term & lost money though. I’ve made (unrealised/unsold) profits that I never even thought would be close to reality by HODLING. Bitcoin has & will make my life by HODLING so yes HODLING is a fantastic thing to do.

If you can afford to buy bitcoin & do nothing with it, simply sit on it for anything over 5 years then you will make ridiculously good profit that’s incomparable with any traditional fiat based stock/asset.

Just look at a chart detailing bitcoin’s price movements from the first block mined to the current day. The overall price trend is upwards & will continue to be.

[Pearls Before Swine]

Op, I tried giving you a merit for your post, but I found that I was out of them. 

As you demonstrated, it all depends on when you got into the market as to whether hodling is a viable strategy.  People who'd bought bitcoin back in the day (2015 and earlier, I'd say) and held onto it are still in the green right now and it was obviously the right move on their part.  In hindsight it's obvious, anyway.

The huge uncertainty is the present and the future, tho.  The question is whether buying and holding is the right move *now* and I would say that it is.  Even if you're a short term trader you could have easily made a profit in the past 2 days when bitcoin fell below $7000 and then quickly rebounded.  And for the long term?  I think buying now would be smart, as I believe bitcoin is still very cheap at its current price.

[mikeywith]

If you can afford to buy bitcoin & do nothing with it, simply sit on it for anything over 5 years then you will make ridiculously good profit that’s incomparable with any traditional fiat based stock/asset.

That is a bit of a bold statement I would say, there is no absolute certainty that Hodling BTC for over 5 years " say 6 years" would make you "ridiculously good profit", while that has always happened in the past, it might not happen in the future.

Having said that, Hodling bitcoin in the first place should be for the sake of securing the value of your wealth against major crisis that will someday hit the traditional monetary system, at some point comparing bitcoin value against goods and services will make more sense than comparing it to a fiat currency that is losing it's purchasing value on daily bases.

The way I picture it is this, if today I can buy a piece land for say 10 BTC , and if I will be able to do the same thing in 5 years from now, that alone is more than enough, there is really no point in comparing BTC price against the U.S dollar as far as the far future is concerned, if those 10BTC are worth 100k each in 2025 but can't buy you the same house, land or number of Pizza , then it's not worth the Hodling , after all bitcoin is not suppose to make you richer, it's meant to store and maintain the value of your wealth.

And for the long term?  I think buying now would be smart, as I believe bitcoin is still very cheap at its current price.

I agree, I just wouldn't go Lump sum at any point as many people do, the wise way to invest in BTC is cost averaging IMO, that way you cut down on the risk and avoid depression.

[jackg]

I made a spreadsheet around July 2019 to try to see how dollar cost averaging performs on a monthly basis.

I came to the conclusion that anything over 9 months displayed good investment potential with around >12 months being the optimum for safety and a small amount of profit.


I did no further analysis after that point because it showed the next nine months were going to be quite bad for bitcoin which I didn't think seemed right but as so far turned out to be true (might be interesting to check the numbers though).

data used was for 2013 to 2019.

[mikeywith]

(might be interesting to check the numbers though).

If you or anyone else is interested in performing more analysis feel free to download the sheets i made

Monthly data > https://drive.google.com/file/d/1d37EW6l0GKkSQfOHGPQEG0hOSvE6QDLT/view
Weekly  date > https://drive.google.com/open?id=1Yy6d_5p-IZ3Bk_JGMccXxj0gqItFGncZ
Daily data > https://drive.google.com/open?id=1ClfjQw0gPay6Pn8MWbC5dkqQVyGetq2Y


You can easily copy-paste the data from the internet and paste it there or make the excel file yourself (not a rocket science  ), but sometimes when you copy and paste to excel things get really messy and require some work, so for those lazy members out there, feel free to use mine.

The best source for this data that I know of is this https://finance.yahoo.com/quote/BTC-USD/history/ , unlike other sources, this allows you get monthly, weekly and daily data ( if anyone is aware of something else that does the same thing please share it). Sadly yahoo finance only stores data from Sep 2014  onward.

[jackg]

I'm leaving this here as a reminder for me to look tomorrow for where I downloaded the rates from. I had to reset Firefox due to a corrupted profile so it lost the download link and it was a csv file so it won't have much meta data.

I know I downloaded one for coinbase and bitfinex I just don't remember where but it's much easier for analysis.

It had open, close, high and low.

[jackg]

Aha! I remembered the site I used:

https://uk.investing.com/crypto/bitcoin/historical-data

I don't know how far back they go but I downloaded from 2013 from somewhere (it was probably there).

P.S to download, I think you have to make an account.

[mk4]

Protip: You can use the website DCA BTC[1] to see how much profit you would potentially make if you bought bitcoin starting at x date, ending at y date, and if you bought them weekly, biweekly, or monthly.

It's honestly a very underrated tool that anyone can use.

P.S. I don't own it nor affiliated with it.

[1] https://dcabtc.com/

[Darooghe]

Yes, Of course. according to PlanB, stock to flow model has a 95 percent accuracy when it comes to predicting the price of Bitcoin. the price prediction is based upon how much stock there is and based on how much flow which would be the amount of mining each year. after each having the monetary reward gets cut in half so the stock to flow ratio drastically changes. Utilizing the stock to flow methodology you can predict an upwards of over $120,000 at the peak and then it should settle back down at a true value of $40,000 until the next halving in 2024.

[panganib999]

Timing is also crucial, by ignoring the two last scenarios that are based on pure luck

This is literally the answer to Does Hodl work. I mean, if you were to invest on BTC right now, Timing would be very crucial in terms of determining whether you profit or not, since Having a period where BTC is down in the dumps and cashing out then would go counter the idea of profiteering out of Hodling BTC. Now if BTC actually died off 5 years prior from now, and said trader invests now, then pretty much, everything is lost. His timing was pretty bad and probably just joined crypto market cause of the hype train.

[Questat]

Yes, HODL does work.

When talking about my strategy of HODL, for me, I don't judge it on a regular and short term basis, I just have to set a good target and wait until that target will be achieve. For me, HODL means I'll be able to hold for a long term if the right timing has not come yet.

For example, I bought at peak in 2017, that means I am still holding until now, and I will never get panic despite of what would happen to the market.

[alexsandria]

Yes, HODL does work.

When talking about my strategy of HODL, for me, I don't judge it on a regular and short term basis, I just have to set a good target and wait until that target will be achieve. For me, HODL means I'll be able to hold for a long term if the right timing has not come yet.

For example, I bought at peak in 2017, that means I am still holding until now, and I will never get panic despite of what would happen to the market.

You must be firm. However, people aren't have the same approach as you. Or you may be wealthy from behind so that you ain't worrying what would be the market held from time to time. If people have the same attitude as you, I just see a healthy environment. More positivity, I supposed? Full of encouragement, and such things.

[gweedo]

Yes, HODL does work.

When talking about my strategy of HODL, for me, I don't judge it on a regular and short term basis, I just have to set a good target and wait until that target will be achieve. For me, HODL means I'll be able to hold for a long term if the right timing has not come yet.

For example, I bought at peak in 2017, that means I am still holding until now, and I will never get panic despite of what would happen to the market.

You must be firm. However, people aren't have the same approach as you. Or you may be wealthy from behind so that you ain't worrying what would be the market held from time to time. If people have the same attitude as you, I just see a healthy environment. More positivity, I supposed? Full of encouragement, and such things.

There are a lot of people still holding between 2017 and 2018, but it's a shame that they were frustrated by the market and constantly afraid of it. They will be willing to dump when prices go up a bit. I still remember the moment BTC increased to $ 13k, most of them all sold and left this market because they couldn't wait any longer and accept their losses in this market.

[exstasie]

Timing is also crucial, by ignoring the two last scenarios that are based on pure luck, Hodling seems to perform well IMO, if joining around the peak keeps you close break-even, joining at the right time or just far enough from the peak- will most likely put you in profit over a long enough period of time.

Words of wisdom from Tom Lee:

Reminder that BTC generally generates all of its performance within 10D of any year.
--ex[cluding] the top 10 days, BTC is down 25% annually since 2013

https://twitter.com/fundstrat/status/1113163417278406656

Most of BTC's gains are realized over a very short period of time. The rest of the time is spent reverting to the mean, correcting, ranging. So investors who missed the rally need to plan on long term holding (on a time scale of many months or years) to ride out these periods.

[CryptoBry]

Holding can be working profitably if you started with Bitcoin for a long, long way cheaper than the price today. Example, if you happen to get into Bitcoin while the price was hovering around $1000 then even if Bitcoin can go as low as $5000 then you have nothing to worry about. However, if you happened to be a part of the great avalanche of buyers in 2017 and you got into Bitcoin at around $16,000 then there can be a big problem. In this case, it is either one should cut loss or really wait things out who knows one day the price can be back at the $20,000 level. Again, who knows! Between trading almost every day and holding, of course trading can be more profitable but this is not for everybody as certainly risks are also involved and this is not passive unlike if you just sit back and relax by holding. However, with the way things are with Bitcoin it can surely be stressful.

[pooya87]

Looking at how "bad" the past 2 years have been for bitcoin, and out of curiosity and because many people don't know if Hodling does or doesn't actually work, I have decided to make an excel sheet and see if Hodling does work for the course of long period of time.

it depends on how you define "bad".
price hasn't been rising ridiculously fast as some people expected it so that is bad. otherwise past 2 years have been good. we had the bubble burst that is necessary to keep the market healthy and the bear market that lasted too long (that part was bad) then we had one year of bull run in 2019 which is good!

as for buying, things have been bad ONLY for those who bought bitcoin in the last week of the last month of 2017! otherwise for anybody who bought bitcoin before that, ~80% of last 2 years the price has been above their entry point...

[Wexnident]

Hodl works yes, if you know when to enter and exit the market after a long run. The idea of hodl intensified cause of the 2017 bubble which caused literally everyome that bought BTC at 100$ to profit so much that now, almost everybody is saying that just keep hodling, you'll profit sooner or later. I won't refute the idea but the result still stems to how BTC could possibly move in the future and how the trader himself is gonna enter/exit the market.

There's also the fact that every halving seems to produce some sort of force that pushes BTC to reach a new ATH, solidifying the assumption that Hodl has a 100% profit rate when in reality, its not.

[Ryker1]

Well, holding is totally worked. Because holding is not just working for only a week or a month(s), probably it will run over a year. If you did not see that your profit was not there from the time you bought your bitcoin, do not rush to sell with it. Being patience is the key to have success and get a better profit. Indeed, in OP's story, Joe was on panic selling and did not control himself because he saw that the market was drastically down and probably thinking it will turn out to zero which very impossible. He never thinks that Bitcoin's price is very volatile. Do not enter and invest in the crypto market if you do not fully understand how it works.

[okala]

A very nice price analysis you have up there. Bitcoin has been good investment to me and I have been making to some extent profits and that is because I don't follow years but indicators and that is what we should all do in other to see bitcoin as a good investment.