The Bitcoin world has its own little cheeky vocabulary that has been around for several years. While terms like FOMO (Fear of Missing Out), FUD (Fear and Uncertainty), Moon (sudden comprehensive price increase) and Lambo (short for rich enough to buy Lamborghini) have become both useful and amusing among crypto traders, one term has defined the cryptocurrency sector in many ways i.e. HODL (Hold On for Dear Life). Many Bitcoin early adopters and visionaries have called HODLing the ultimate philosophy that will continue to give buoyancy to the sector no matter the economic conditions.
The Allure of HODLing
HODL, an alternative spelling sometimes considered for HOLD, has defined the sector because it envisages users going long on the cryptocurrency and not engage in short-term trading. With this approach, lesser and lesser number of coins remain in trading circles and thus the supply is choked. Due to this choked supply, the value of the cryptocurrency is guaranteed to increase steadily in face of all odds. While the cryptocurrency sector sees a lot of trading, the original adopters as well as idealists scoff at the idea of day trading and believe it imparts unnatural volatility to the cryptocurrency and thus, is a hurdle in its progress. With Bitcoin becoming scarcer and the supply being reduced from 12.5 BTC every block to 5.25 BTC every block, it can be seen that more and more investors are opting for HODLing in its buildup rather than short term options like day trading.
The Current Sentiment
While HODLers have always maintained their place among the crypto investors, the current sentiment is heavily favoured towards HODLers due to a number of factors. First of all, Bitcoin whales are increasing their presence and are HODLing more and more Bitcoin. Whales are large investors with a huge amount of Bitcoin to their name. They come to play every now and then and they can affect the cryptocurrency prices as well. However, whales are generally not involved in day trading as that would involve huge amounts in transaction fees and they generally HODL till their targets are achieved.
The number of Bitcoin whales HODLing the cryptocurrency is around an all-time high, mimicking the previous halving back in 2016. With just over 1850 Bitcoin addresses holding over 1000 BTC in their wallets, the number is very similar to the 2016 halving when investors began to accumulate the cryptocurrency in build up to the halving. While that halving didn’t have any immediate effect on the price index, in the long-term Bitcoin gained over 36 times within one year and reached its all-time high of around $20,000 in January 2018. The massive price increase is often attributed to the smaller supply of new coins as well as the HODLing sentiment that further aggravates the differences between demand and supply. The current sentiment is heavily biased towards HODLing as the number of Bitcoin whales is near all-time highs, but what about average investors who have the bulk of the cryptocurrency in their hands?
Bitcoin Investors Going Long
The good news on that front is that on average, more than 75k BTC ($600 million) is being added to long-term positions by cryptocurrency users on a daily basis according to monitoring organization named Glassnode. The same organization also keeps tabs on whale activity as well. According to the monitoring gurus, the cryptocurrency investors are buying and stacking up their coins in full HODLing mode. This is because many consider the current prices to be bargain prices and are thus accumulating Bitcoin for a possible future bull run.
The market sentiment indicator named Holder net position change is showing a deep undercover buying spree and it is no surprise that the cryptocurrency is having bullish second thoughts despite undergoing an extremely disappointing March 2020. The overall sentiment is of buying but the uncertainty around halving might be causing bulls to become reluctant and only proceed once the dust is clear. The market sentiment can be viewed on Glassnode. Other organizations keep tabs of it as well.
The Price Behaviour in the Short-term
Previous graphs comparison shows that Bitcoin always undergoes a considerable small bull run in the buildup to the halving itself. Both 2012 and 2016 halvings had a bull run a few days before the actual halving that results in some gains for the cryptocurrency investors. HODLers however have late 2020 in their sights for the next bull run and are therefore reluctant to part with their precious accumulations and on the same time, short-term traders are wary of the halving process and thus may not risk more to earn more in the buildup to the halving. Therefore, this time the short bull run may not be experienced at all but if it does, the next week is an ideal time for it to happen. For now, the Bitcoin price index is indecisive and is not moving in any direction in a discernable manner. This is once again encouraging HODLers to hold their crypto and not liquidate it in the future to capitalize from fluctuations.
Bitcoin’s halving is a crucial crossroads event for the whole cryptocurrency sector. Much of the activity and investment is tied to the long-term stability and price of the premier cryptocurrency so, it is being anticipated but with a pinch of salt. But, one thing is for sure and that is that the buildup of long-term positions is increasing in the run up to the actual halving that will take place on May 12, 2020. If the whales and the HODLers hold on for now, the supply will immediately choke after the halving and thus, the value of existing coins will see a sharp appreciation as a result. However, nothing is certain at the moment because whales have a history of dumping the cryptocurrency if their calculations are not met or the fact that prices are expected to go towards a downward trajectory. Only time will tell, but for now, HODLing is king again.
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