To HODL Or Not To HODL – The Bear vs Bull in Bitcoin?

by Avramis Despotis     Jan 13, 2021

To HODL or not to HODL, that is the question. Since it’s not covered in regular bitcoin trading 101 classes nowadays, let’s quickly fill you in on what HODL means. HODL is a misspelled variant of the world “hold” which is pretty common terminology in the regular finance industry. It came about when an intoxicated user made a post on a prominent bitcoin discussion board, announcing his intent to “hodl” all his Bitcoin. The community loved it and quickly adapted his typo as part of their terminology, at first mockingly and nowadays rather seriously.

The question whether to hold onto your Bitcoin today is a more interesting topic that ever before. There are two ways to look at the topic, the bull case and the bear case. For those who didn’t take a trading 101 course of sorts – bull and bear are terms to describe trading approaches. A bull market is one wherein the economy is growing and investors are optimistic, driving prices up over time. A bear market is the opposite: it’s wherein a market’s investors are pessimistic and prices are falling. These two concepts go hand in hand with the economic cycle and are applicable to Bitcoin too.

1) Bitcoin As A Bull

The bull case of Bitcoin is rather simple: patience. The fact that Bitcoin reached over $18,000 in 2017 is an indicator that it could reach those levels again in the future and perhaps even surpass them. One such potential instance is the fact that the total amount of Bitcoin that can be in circulation at any given time is limited and due to the efforts of cryptocurrency miners, the market is approaching its cap. Since the supply has a hard limit and demand does not, question on whether to hold on Bitcoin can be determined by whether an investor believes it’s demand is going to go up as the supply limit is reached.

Looking at Bitcoin’s historical pricing chart, we can see that its growth seems to always occur in spurts. Given that historical data, one can assume that such a spurt or two is going to come again in the near future, meaning it would make sense to hold onto Bitcoins until such a spurt is achieved.

Treating Bitcoin as a Bull Market also implies the patience to wait out to see what government stances will be on the topic of cryptocurrencies, as well as what other industry factors will come into play to drive the Bitcoin price up or down. Bitcoin-based EFTs might on the horizon, which should drive demand and technological advancements are making the Bitcoin network faster and securer.

2) Bitcoin As A Bear

The bear case for Bitcoin is as simple as the bull case. In the bull case the main factor is patience, whereas the bear case is all about risk. In both 2017 and 2018 a steady stream of hacks and other types of bad press had hit Bitcoin. This has done quite a lot to make Bitcoin seem as a currency for criminals trying to hide their identities. The largest hack in Bitcoin happened to Coincheck, one of the formerly major players in the crypto exchange markets, where over $500 million of Bitcoin (valued at the time of hack) had been stolen.

The gamble to introduce Bitcoin futures hasn’t really paid off and is in fact partially responsible for the increase in volatility of the market. The bad press continues with plenty of finance experts, prolific entrepreneurs or politicians weighing in on the topic of cryptocurrency, many with negative comments about the concept.

Several companies have taken stances to block all forms of cryptocurrency trading, advertising and payments on their platforms, including internet giants Facebook, Google, Twitter and Reddit.

At the end of the day, the question whether to HODL on Bitcoin or whether not to comes down to your research and belief whether Bitcoin is going to go up or down. There is data to support both sides – and at the end of the day, your investment philosophy is what matters in making a decision.

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