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Almost half of the BTC supply is stagnant Is holding BTC for so long a good strategy? HODL and DCA are the most critical investment methods The benefits of DCA include the following: Still, the holding strategy has its drawbacks So, what can you do to balance the situation? Do you hold your Bitcoin for longer?Bitcoin is the leader in terms of trading and exchange, followed by Ethereum and the USDC. The cryptocurrency gained considerable popularity over the years as more users adopted it for their investment portfolios, some of which became important whales on the market.
Bitcoin’s popularity and use cases have developed so much that the coin is now close to worldwide adoption as a legal tender. In El Salvador, citizens already use Bitcoin as a means of payment and exchange, while other nations are considering taking this step for financial benefits as well.
Leveraging cryptocurrency can be profitable for a country. Binance data shows that there are plenty of ways to buy Bitcoin, from using a debit or credit card to a third-party payment, which makes transactions fast, safe, and efficient.
However, research shows that users prefer to keep Bitcoin for themselves instead of using it for exchanges. Here’s why.
Almost half of the BTC supply is stagnant
Data about the BTC supply shows that a surprising 45% of the cryptocurrency has not been moved by users in about six months, meaning they would not let go of the coins despite the challenging periods Bitcoin has been through since the beginning of the year. Although the coin started well due to the approval of BTC ETFs, it slowly went in the opposite direction as institutions stopped buying stablecoins, while the price was stuck for some time at the start of the month.
Therefore, it’s easy to understand why investors have been more cautious about their movements. The unpredictability of the cryptocurrency market was especially demanding. Therefore, investors prefer to do nothing with their Bitcoins and just wait for a more profitable opportunity to spend or buy them.
Long-term holders (LTH) might have gained significant wealth on the network recently despite the recent price lows. Still, the considerable value fluctuations show trends of uncertainty from investors.
Is holding BTC for so long a good strategy?
Holding Bitcoin or any other cryptocurrency for an extended time without selling or buying is part of the HODL strategy (hold on for dear life). This strategy implies that the longer you keep the coin in your wallet, the faster its value will increase. At the same time, holding cryptocurrencies when the market is unstable is a safe way to protect your investments.
The strategy was first named in 2013 when the massive volatility of Bitcoin price made people fear doing something with it because either selling or buying could pose the risk of losing all assets. As crypto experts consider, the best time to hold crypto is always, regardless of the market’s waves.
Holding is also a great strategy against FOMO (fear of missing out) because it helps investors suppress their biases and fears that usually lead to selling or buying crypto without analyzingthe situation.
HODL and DCA are the most critical investment methods
Along with holding crypto for as long as they can, investors can approach the dollar-cost averaging strategy, in which they regularly invest crypto over a longer time despite price swings. This strategy allows them to decrease the average cost per share and slow down the volatility impact on their assets.
The benefits of DCA include the following:
• Less money spent on investments;
• More discipline in investing;
• Enhanced by automatization;
• Releases FOMO problems;
Usually, beginners use DCA as they get used to the market’s changes and unpredictability. In addition, having a separate amount of assets to hold for longer can help build wealth. Therefore, long-term investors can also benefit from this strategy combination.
Still, the holding strategy has its drawbacks
Besides ensuring immunity to long-term volatility and encouraging financial inclusion, the HODL method is far from perfect, as it can expose investors to some challenges. First, holding crypto for longer does not automatically protect you from market risks and value depreciation, which is why adjusting the portfolio every now and then is so important.
On the other hand, having a handful of cryptocurrencies in your portfolio that stagnate might make your portfolio vulnerable to attackers, especially if you previously used a debit or credit card to buy crypto. Although most exchanges are safe, even the tiniest crack in the system can make you one of the hackers’ victims.
Finally, only holding means less exposure to the market, which is essential for learning how to work with crypto. Since you primarily use simple tools for holding, you may be less prone to becoming familiar with more crypto terms and strategies or engaging with other investors.
So, what can you do to balance the situation?
It would be best to know that whatever you do, the volatility of the crypto market cannot be withstood entirely. However, there are some things you can do to lower its impact on your portfolio while you learn more about triggers and factors.
Getting ahold of holding BTC and other cryptocurrencies for longer is essential to building wealth. However, you still need to invest regularly to be active on the network. Finally, those two strategies should be combined with portfolio diversification.
Diversifying your crypto assets is one of the most essential methods of being successful. When you’re closely analyzing a coin's performance, you can decide to let it go or amplify its value, depending on the market trend. For instance, investing during bull markets is best as the general investor sentiment is positive and numerous technological improvements happen. On the other hand, bear markets are less optimistic, a time in which you may want to hold your coins and refrain from crypto activities that much.
Do you hold your Bitcoin for longer?
Holding cryptocurrency is an efficient method of gaining wealth, especially with coins like Bitcoin. At the same time, adding more assets like Ethereum, altcoins, and stablecoins will balance your portfolio and make it less susceptible to risks and attacks. Lately, investors have been seen holding their Bitcoins much more than before in light of recent events in the crypto market. Holding is a productive investment strategy along with dollar-cost averaging and diversification.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
