Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Bitcoin Slumps: Should You Buy, Sell, or “HODL?”

Stock MarketsSep 22, 2021 16:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Bitcoin Slumps: Should You Buy, Sell, or “HODL?”

Volatility is the trademark trait of cryptocurrencies like Bitcoin. Day traders love this trait, but long-term investors … not so much. The volatility and unpredictable nature of cryptocurrencies like Bitcoin makes them shaky long-term holdings, especially now, when Bitcoin has supposedly reached near its new normal “high.” If it keeps hovering between US$40,000 and US$60,000, the high-risk, high-reward equation wouldn’t really work immensely well for new buyers.

The case for selling If you’d bought Bitcoin anytime in 2020, you could sell it for a profit. But selling rewarding crypto like Bitcoin for a double-digit gain doesn’t make sense, unless you are cleaning house. However, the further you go, the sweeter the profit margin becomes. If you’d bought crypto during the market crash, when it fell below US$6,000, you would still be sitting on over 700% gains.

As a relatively lucky investor, if you’d bought Bitcoin when it had a four-digit price tag, and you stand to make decent gains, even if you sell now, it might be a good idea to go for a partial sell. Selling 50% of your stake will free up a decent amount of capital, and you can reinvest it in Bitcoin (or other cryptos) during the next sizeable slump.

The case for “HODLing” Holding on to your Bitcoin holdings makes sense, especially if you bought high. But even if you bought relatively low, like when it was trading at US$20,000, you can turn in a neat profit if it reaches $100,000 — i.e., five times the capital.

And even if you bought it too low and you can still earn a sizeable profit if you sell now, go with “HODLing (holding on for dear life).” That’s because the chances of Bitcoin falling below US$10,000 (without ample warning) are quite low compared to the chances of it reaching new heights. If you hold, you will have a choice between selling for relatively low profit and selling for massive gains (a meagre chance of losing money).

The case for buying This is not a very strong case, realistically speaking. Bitcoin is trading for a bit lower than US$50,000 right now. Its chances of reaching US$100,000 are good but not great. And the odds of reaching half-a-million USD are quite low. Directly investing in crypto might not be a great idea, but investing in crypto stocks can magnify the gains and potentially give you a little bit more time before taking a dive (unlike the crypto itself).

Bitfarms (TSXV:BITF)(NASDAQ:BITF) is dual-traded and has extensive mining operations in North America. Its strong points include a clean-energy-fueled mining operation (hydro-powered), which shields its mining from any prospective environment-related hurdles. It also has a low cost of operation. Mining one Bitcoin currently costs the company US$9,000, which is less than one-fifth of the current value of the Bitcoin.

The stock has tracked the value of Bitcoin relatively faithfully, thanks to its direct exposure as a miner. Its 12-month growth is over 1,600%, and that’s when the stock is already down 24% from its yearly peak. The current movement is downward and might continue until Bitcoin’s upward momentum becomes apparent. That turning point would be the ideal time to buy.

Foolish takeaway Tech stocks are volatile in general, but crypto stocks go way beyond the normal volatility levels. But the principle of buying low and selling high still holds. If you can buy Bitcoin (or associated assets) when its value drops beyond a certain level and keep it for long enough, you are likely to make a decent profit. But buying now in anticipation of 100% gains is an investment decision that should be taken after significant consideration.

The post Bitcoin Slumps: Should You Buy, Sell, or “HODL?” appeared first on The Motley Fool Canada.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

Bitcoin Slumps: Should You Buy, Sell, or “HODL?”
 

Related Articles

5 Dividend Aristocrats Perfect for Down Markets
5 Dividend Aristocrats Perfect for Down Markets By The Motley Fool - Oct 24, 2021

Looking for solid stocks to buy in a down market? If so, Dividend Aristocrats are just what the doctor ordered. A Dividend Aristocrat is a stock that has not only paid, but also...

TFSA Pension: 2 Top TSX Stocks to Buy Now for 2022
TFSA Pension: 2 Top TSX Stocks to Buy Now for 2022 By The Motley Fool - Oct 24, 2021

Tax-Free Savings Account (TFSA) investors are looking for attractive stocks to buy for their self-directed retirement accounts heading into 2022. The winners next year could be...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email