The profit in Bitcoin hodling/holding

[Charles-Tim]

Note: This article is just about predictions of what can possibly occur to bitcoin marketcap and price valution in this recent decade and decades after. People should be careful of bitcoin trading, this article only address how bitcoin hodling can result in profit as bitcoin is perfectly fit more to be the best new age money and assets. Gold and fiat are included in this article because of how they are mostly used by people.

Introduction
Bitcoin created in 2009 by Satoshi Nakamoto but not the owner as Bitcoin is decentralized and coded with open source codes, Bitcoin is owned by holders and people that make use of bitcoin. It is not controlled by governments or any other central authority. Bitcoin is a deflationary money and asset with a total supply of 21 million. Some people think it is possible for this total supply to be increased which will lead to devaluation of bitcoin, but this is not possible as it will only lead to hardfork while new coin will be created like bitcoin cash while bitcoin will remain bitcoin with a total supply of 21 million.

The real price of gold and gold nature
Gold is an asset, also an appreciative asset, the precious metal technically broke its U.S. dollar all-time high in 2020, hitting $2,075, according to TradingView data. Its 1980 record purchasing power level remains unbroken, however.

Gold reached a price of $678 U.S. dollars in 1980, according to a breakdown from Visual Capitalist. Accounting for inflation, based on calculations from Officialdata.org, $678 in 1980 held the same buying power as approximately $2,142 in 2020.

Gold also has continuous supply, the continuous supply is one of the reasons that make the an asset not to increase in value the way it suppose to because supply decrease asset value while demand increase it.

Fiat intrinsic depreciating nature
Fiats are depreciative in nature, one of the reasons is because fiat is controlled by central body (the governments), he governments like to maintqin and control foreign reserve which can be affected due to different factors, if foreign reserve is depleting, the government will not have any option than to devalue their local currency to reduce to rate of foreign reserve that is decreasing. I will not have to go into this deeper, but fiat are just controlled by governments and the governments can regulate it to appreciate or depreciate in value. But, since many years ago till now, countries local currency has devalued over long period of time, this is worse in underdeveloped and developing countries while developed countries are not left out.

Bitcoin limited supply
Bitcoin has been the money and asset with limited supply, only 21 million bitcoin will be in total circulation while over 18 million has been mined already. The limited supply is one of the point of attraction of new investors and would still be the point of attraction for more many investors. What has limited supply will have value, this has been the reason from technically looking at Bitcoin calling it deflationary asset. Anything that is deflationary will be able to appreciate in value which could the reason people will invest more in bitcoin in the future which it's price would really be driven by demand while the supply is limited.

Bitcoin price in relation to halving
This is just to indicate how bitcoin abrupt supply cut as mining reward is reducing making Bitcoin increase in price to reduce therefore making increasing demand to be the main factor of bitcoin price increase.

First halving, 2012
Initial price before halving: $11
Highest prices:  around 1100
That means it increased 100x

Second halving, 2016
Initial price before halving: around and below $700
Highest price: all time all of $19,665.36
That means it increased over 33x

Third halving, 2020
Initial price before halving: price around $8900

Shifting from abrupt supply reduction to increasing demand in bitcoin price valuation
According to the data provided above, the price increament after first halving was around 100x which was as a result of sharp fall of bitcoin mining reward (supply) at the time with slight increasing marketcap, but the marketcap after the second halving was more than the first halving and yet having increament of 33x which is lesser than the first halving. Now, out of 21 million bitcoin, over 18.5 Bitcoin are already mined and in circulation. The abrupt supply of mining reward decreasing while the increasing demand is resulting to more increase in price of bitcoin. With this, you can be able to predict how it will be hard for such previous price increament to occur before next halving and the reason in which bitcoin price increase before the next halving may not be up to 33x again, but the price of bitcoin will definitely still increase which can possibly be 10x maximum. Although, this might be otherwise but technically not.

Possible decade events
Bitcoin was perfectly created, the limited supply which can be one of the reason many investors are turning to bitcoin, having a limited supply is a sign in which bitcoin price may appreciate with increasing demand. Now, institutions are turning to invest in bitcoin which has been the reason Bitcoin price really soared in 2020, and this makes it possible for more institutions to join in the game while more retail investors will also still invest. Above, I use gold because it is one of the most successful asset with a marketcap of almost $10 billion, which makes it still indicate that bitcoin at $590 billion is still at its early age, and yet perfect than physical assets which can gain the attention of people in a way they will later invest in it, driving its marketcap to over trillions of dollars. Bitcoin may not increase up to 33x of its price before 2024 halving, the increase may not be sharp like previous time, also the price of bitcoin will increase and decrease, but over long period of time Bitcoin marketcap and price will increase, depreciating nature of fiat prices will make the price of bitcoin to increase the more.

https://bitcointalk.org/index.php?topic=5232054.msg54008321#msg54008321
https://cointelegraph.com/news/gold-and-bitcoin-eye-inflation-adjusted-all-time-highs-but-it-s-taken-gold-40-years
https://www.coindesk.com/microstrategy-ceo-bitcoin-better-than-antiquated-gold

[sheenshane]

Thanks for the input, it seems very helpful even though it's common and frequently asks by some newcomers here.

Several times I saw threads comparing Bitcoin to gold, stocks, or any valuable assets that could be safe to invest with.  Bitcoin is always different from them, Bitcoin has a unique feature that will surely have benefits if you were patiently waiting and holding this just to gain profit.

Those people who understand how Bitcoin works will surely get a profit from Bitcoin holding.  The limited supply is the only one assurance that Bitcoin price will increase from time to time, plus another factor is Bitcoin as of now is on medium exchange.

[franky1]

Gold also has continuous supply, the continuous supply is one of the reasons that make the an asset not to increase in value the way it suppose to because supply decrease asset value while demand increase it.

if you split the gold PRICE in half. you will then have a rough idea of supply vs demand

if it takes ~$900 to mine gold. then no one. no where would dare sell gold for less then they mined it. as thats stupid
however the other $1242 'speculation' half is volatile based on demand.
obviously with gold mines and factories shut down due to covid lockdowns in spring 2020 this created a speculative demand for gold. but most gold miners had cheap diesel and those able to mine had less cost.
its estimated that some miners previously averaging a $900 cost in 2019 were getting a $600 cost in 2020
but with less miners. the speculation demand pushed up the profits for those miners.
they basically had a $900 cost and a $1800 sell (100% profit) but in 2020 at $600 cost and $2100 sell.(250% profit)

in short this $2100 is a bubble.

bitcoin mining can also show the same dynamics. and although there is a good underlying cost that prevents bitcoin going to 0 unless mining cost went to 0. you can work out how much of the speculative zone is inside the price to work out when things are just a slight inflated value or a entire bubble inflation amount

right now the mining costs are $16k-19k depending on if hardware is s9-T19
so only 100% profit.

[Ultegra134]

Thanks for the input, it seems very helpful even though it's common and frequently asks by some newcomers here.

Several times I saw threads comparing Bitcoin to gold, stocks, or any valuable assets that could be safe to invest with.  Bitcoin is always different from them, Bitcoin has a unique feature that will surely have benefits if you were patiently waiting and holding this just to gain profit.

Those people who understand how Bitcoin works will surely get a profit from Bitcoin holding.  The limited supply is the only one assurance that Bitcoin price will increase from time to time, plus another factor is Bitcoin as of now is on medium exchange.

Great research work, you've combined years of data into one constructive and coherent post, with information useful for future investments.

Agreed, Bitcoin has been compared several times throughout its existence, from gold, to stocks or other altcoins (at least those a similar philosophy and characteristics with Bitcoin).

However, I don't think there's such a thing as a safe investment. Looking at Bitcoin, you'll notice a wide volatility, I'm sure quite a lot of investors have lost money after the 2017's price crash. The positive thing about it though, is that it can be both a long term and short term investment, whatever floats your boat.

Since circulating Bitcoins are limited, the demand will continue to rise, as time goes by and so will its price.

[maxreish]

Honestly, I have  gold and btc as my investment. And I never regret that I put my money into these. In fact, gold is worth to invest IMHO as it maintain the value and attractiveness over the period of time. Although bitcoin is volatile and hard to predict the price most of the times, but let me tell you that I do enjoying my profits with these bull run lately.

While gold is less volatile and bitcoin is indeed volatile, having the two as an investment is worth enough.
I like how OP showed the effect of halving from 2012 up to 2020. These open up out awareness how this halving really affect bitcoin's price causing the surge up.

[Walterhank]

Thanks this is quite valuable information and is very helpful in clearing out the confusion. I do have one silly question but will be glad if you can answer it. Question: what do you think is the reason why people stop HODling? What could be the motivating factor?

[Lorence.xD]

Short trading will bring significant profit only if you do it every day. That's why I often prefer hold.

Have to agree with that one, short term trading removes your free time because you are constantly on the watch for a minor fluctuation in the market. Hodling on the other hand requires a will to not be attracted to the current prices compared to when you bought it because you might not be seeing the bigger picture.

I hope that this thread will answer the question that people has been imposing on bitcoin regarding its relationship to gold. Bitcoin is different from gold.

[Latviand]

Short trading will bring significant profit only if you do it every day. That's why I often prefer hold.

I trade and I hold, it really makes me comfortable when I trade for a short-term profits.

Holding is good because you are just playing safe with your assets and wait for a rise of profits so that you can seize the opportunity to sell it in a higher prices.

But you need to understand both, you need to deal with the two so that you can have different sources of profits.

[AniviaBtc]

Some investors prefer to invest on Gold and bitcoin at the same time, they also invest on other altcoins so that their profits is not that unstable. If you have a lot of source of profits in the market then probably you can make yourself successful in many ways and I know that bitcoin can be the best asset that you can hold. Gold will give you profits in a long period of time when you hold, while in bitcoin, it can also give you profits when it is in an ATH or upward movement. You can also trade bitcoin and other altcoins depending on your preferences and skills because trading is somehow profitable besides holding.

[ethereumhunter]

Short trading will bring significant profit only if you do it every day. That's why I often prefer hold.

I trade and I hold, it really makes me comfortable when I trade for a short-term profits.

Holding is good because you are just playing safe with your assets and wait for a rise of profits so that you can seize the opportunity to sell it in a higher prices.

But you need to understand both, you need to deal with the two so that you can have different sources of profits.

But if we are only holding, we will see the value will increase and decrease, making some people feel not comfortable looking at their balance. But if he does not mind to see that, he can hold it until the price can reach his target price. I think it is why we need to learn to trade, so we can try to make short term profits while increasing our holding amount to bigger.

[Oshosondy]

But you need to understand both, you need to deal with the two so that you can have different sources of profits.

The kind of knowledge needed by traders is more than the knowledge needed by holders, it should also be known that trading carries highest risks. For experts, trading can be a potential way to earn more bitcoin, some even can margin the trade or have a future contract. But trading is not easy and not for everyone like holding can be. People may only have little knowledge about holding and yet have profit, holding is not risky like trading is, holding can be perfect for those that have little knowledge but want to invest.

[mersal]

Gold also has continuous supply, the continuous supply is one of the reasons that make the an asset not to increase in value the way it suppose to because supply decrease asset value while demand increase it.

if you split the gold PRICE in half. you will then have a rough idea of supply vs demand

if it takes ~$900 to mine gold. then no one. no where would dare sell gold for less then they mined it. as thats stupid
however the other $1242 'speculation' half is volatile based on demand.
obviously with gold mines and factories shut down due to covid lockdowns in spring 2020 this created a speculative demand for gold. but most gold miners had cheap diesel and those able to mine had less cost.
its estimated that some miners previously averaging a $900 cost in 2019 were getting a $600 cost in 2020
but with less miners. the speculation demand pushed up the profits for those miners.
they basically had a $900 cost and a $1800 sell (100% profit) but in 2020 at $600 cost and $2100 sell.(250% profit)

in short this $2100 is a bubble.

bitcoin mining can also show the same dynamics. and although there is a good underlying cost that prevents bitcoin going to 0 unless mining cost went to 0. you can work out how much of the speculative zone is inside the price to work out when things are just a slight inflated value or a entire bubble inflation amount

right now the mining costs are $16k-19k depending on if hardware is s9-T19
so only 100% profit.

Clear overview about mining cost in 2020 so unlikely any new miner comes to mine now due to the expense factor because domestic power charges are actually higher it's even a lot higher on certain regions along with air conditioning and regular maintenance will make it less profitable.SO the term halving itself used for the speculation which keeps boosting the prices up after every halving event.

[sana54210]

But you need to understand both, you need to deal with the two so that you can have different sources of profits.

The kind of knowledge needed by traders is more than the knowledge needed by holders, it should also be known that trading carries highest risks. For experts, trading can be a potential way to earn more bitcoin, some even can margin the trade or have a future contract. But trading is not easy and not for everyone like holding can be. People may only have little knowledge about holding and yet have profit, holding is not risky like trading is, holding can be perfect for those that have little knowledge but want to invest.

That is exactly why I am a holder, I keep buying bitcoin and I do not lose in the long run, and knowing that is enough for me. A trader needs to know when to buy and when to sell how much to buy how much to sell what is going on with other things and so forth. To me? I just need to end up buying bitcoin anytime I can afford to, and that is enough.

This is why being a holder is more than enough for me, there is no reason for bitcoin to be some dangerous risky thing for me, I do not need to study anything, I do not need to end up becoming expert veteran trader, these are all useless things, sure they may make more money than me if they are great traders, however I end up making a decent amount of profit anyway, so why would I end up not going long? I just buy and wait and I still make a profit and it requires zero knowledge, and it has zero risks (well not zero, but at least little).