One year ago today, bitcoin’s price was around $18,600. Today it’s above $54,000. Over the past weeks, however, there’s been a sizable correction of over 20% from its all-time high of nearly $69,000. But this kind of “crash” is normal. Price action over recent months has been phenomenal.
People are trading too often and using too much leverage. The majority will blow up their accounts as a result. For investors sitting in spot bitcoin or ethereum (no leverage/margin), this pullback is no big deal. But for many traders, using leverage, this recent pullback is devastating. The real advantage of buy and hold: You’re far more likely to come out the other side with a big win.
And do not forget the tax and compounding effect. Holding long term, is far more tax efficient than trading, assuming you actually make profits with trading crypto. Paying taxes multiple times per year has a serious negative-compounding effect on long-term returns. If you can delay those taxes by holding for 10 years or more, the compounding truly works.
Sven Franssen