Buy bitcoin while holiday prices rise near $ 27,000? Strength!

Ho, ho, HO-DL! This is what the bitcoin believer should think – referring to the ability of investors with digital assets to hold on to, or HODL-ing, bitcoins through the good fortune – during especially lively holiday trading for the world’s digital currency no. 1.

Bitcoin prices broke records over the Christmas weekend as investors looked to close a historic 2020 for the world’s most prominent cryptocurrency, amid a global pandemic.

A single bitcoin briefly traded at a record high of $ 27,000, finally on Sunday afternoon on CoinDesk, after reaching a historic high of about $ 25,000 around the Christmas period. Bitcoin BTCUSD,
trade never sleeps.

Bitcoin prices have risen by more than 276% so far in 2020. For comparison, the Dow Jones Industrial Average DJIA,
+ 0.23%
increased by almost 6% in 2020, the S&P 500 index SPX,
+ 0.35%
rose nearly 15%, while the Nasdaq Composite Index COMP,
+ 0.26%
has climbed almost 43% to date.

Virtual currency fanatics point to the increasing attention of institutional investors and mainstream companies, who now view the decentralized currency as a legitimate asset, or at least a possible hedge against valuations in other parts of the financial markets, including the US dollar.

Indeed, the rising prices of bitcoin, after an epic decline three years ago, come because the US dollar is undergoing a steady decline that some attribute to the belief that digital assets will one day replace fiat currencies such as the dollar. Bitcoin is seen by many as a hedge against the devaluation of dollars, which was part of the emergence in 2009, following the economic carnage that caused the financial crisis in 2008.

Naysayers warn that bitcoin is a technological innovation supported by the air and that it can probably be eliminated at some point if it does not collapse.

However, this did not stop enthusiasts from declaring the current bitcoin rally as just the beginning of a profound shift in the financial markets.

PayPal PYPL,
recently allowed users on its platform to buy bitcoin, as well as other sister scripts such as ethereum ETHUSD,
+ 5.01%,
Bitcoin Cash BCHUSD,
+ 4.04%
and Litecoin LTCUSD,
Square is SQ,
popular Cash app also allows users to buy and sell bitcoins.

On Saturday, Tim Draper, a startup investor who made his name in Silicon Valley for successful investments in companies like Skype and Twitter Inc. TWTR,
and some remarkably unsuccessful investments in Theranos, predict, via a tweet, that bitcoin prices would see a 10X growth of current levels by 2022 or 2023.

The trillions spent so far by governments and central banks to combat the economic crisis caused by COVID-19 are also seen as supporting the rise of digital assets such as bitcoin.

One of the more tantalizing questions that arises in the financial markets is the portfolio modeling: does bitcoin fit into an average investor’s portfolio, and if so, in what ratio?

The truth is that no one really knows.

Many advisors suggest that only those who are financially worthy to withstand a significant loss should even consider it in digital assets. And even then, bitcoin is considered an asset that should make up a small portion, between 1% and 5% of the total portfolio.

Read: Advice: Why the only place to invest in bitcoin is in your IRA

‘Although I’m not sure what I should make of this parabolic move in bitcoin (when I talk to individuals, I thought bitcoin might play a small role in your portfolio, but it should be very speculative and not a currency)), ”wrote Peter Tchir, head of marketing strategies at Academy Securities, in a weekend research note.

He added that the move of bitcoin, as with many assets in the financial markets, could rise due to super low interest rates and the fear of missing out, or FOMO, with investors raising the price of an asset they still have not adopted earlier.

The researcher also said that individual investors, using popular investment programs such as Robinhood, may be behind bitcoin’s rise, which could make profits similarly vulnerable to a major downturn as observed in 2017, when the asset was knocked on the door at $ 20,000. had to just after a about $ 3,000 before starting with a plodding increase of 36 months.

“Perhaps people are of the opinion that the ‘Robinhood’ traders have lowered their day trading, which has driven the speculation to bitcoin (which should not discount the number of ads I get to ‘play sports bets’),’ Tchir said. written.

At its core, bitcoin is a software tool that allows anyone to remember transactions on an immutable digital ledger. So-called bitcoin miners solve complex puzzles or cryptograms that require extraordinary computing power and help confirm transactions, and miners in turn are rewarded with bitcoins for the effort.

This technology theoretically prevents double spending and anonymizes users, which is why critics argue that its primary use is money laundering and corruption.

In his nose, a single bitcoin was worth a fraction of a cent, but its movements over the past 11 years have been stratospheric, as demand has risen from both mainstream users and new corporate and individual entrants, making the matter a revolution. in financial markets is imminent.