By
Steve Muchoki
April 23rd, 2024
Bitcoin advocate and Fundstrat’s co-founder Tom Lee calls cryptocurrency investors to be patient and to HODL if they want to avoid losses.
Tom Lee, one of the most famous Bitcoin and other digital currencies analysts, Fundstrat Global Advisors co-founder and former chief equity strategist at JPMorgan Chase & Co, has presented his new overview of the cryptocurrency market.
Despite the fact that Bitcoin has been moving within the bearish trend since the second half of December 2017 and has decreased from more than $20,000 to $6,921.71 at press time according to CoinMarketCap, Lee still supposes that its price is going to skyrocket. According to Lee, in 2018 Bitcoin will hit $25,000 and now, in the period of decline, investors should just keep calm and be patient.
In his official note Lee wrote: “Market timing is generally discouraged in traditional equity investing. If an investor missed out on the 10 best days (for S&P 500) each year, the annualized return drops to 5.4 percent (ex-10 best), from 9.2 percent. In other words, the case for buy and hold in equities is the opportunity cost of missing out on the 10 best days.”
So, the idea is the following: if you manage to define the 10 worst days and be out of the market during this period, your return would be significantly higher than the Index. Nevertheless, it is really complicated and maybe even practically impossible to determine those 10 days.
But the situation with Bitcoin dramatically differs from the above mentioned scenario. Based on his rich experience, Lee has made a conclusion that on average the price for Bitcoin was declining every year with the exclusion of the top 10 day when it was increasing. It can be concluded that other 355 days are not good days for trading.
Lee has analyzed Bitcoin’s return in the last six years, pointing out its return in its top 10 days each year and in the rest 355 days. The results show that if an investor hadn’t managed to identify those 10 best days and had lost this chance, than they would have lost money in those years.
Fundstrat’s analyst believes that given Bitcoin’s volatility, it is much more sensible to be a HODLer (which in cryptocurrency vocabulary means to be “a long-term holder”) than to conduct any short-term trading. In this context, let us also remind that $25,000 for Bitcoin is not the most optimistic Lee’s forecast. The expert has also predicted that Bitcoin could reach $91,000 by March 2020.
What’s more, Tom Lee has elaborated the Bitcoin Misery Index, or BMI. The lower this indicator is, the higher is the probability that Bitcoin will move up in price. The recent chart from March 9 report shows that at the moment it is quite a good time to buy Bitcoin but not to sell it as the indicator is in its “Misery” phase. Nevertheless, according to Lee, now we have all the grounds to expect that the Bitcoin’s price will go up soon .