Why ‘HODL’ing’ Your Bitcoin Pays Off
Article Published by: forbes.com
Bitcoin investors are witnessing a meteoric rise of the digital asset and have accumulated more than 170% year-to-date returns. Most recently, Bitcoin’s avid critic economist Nouriel Roubini recently softened his stance in an interview stating that Bitcoin may be “partial store of value.” Ranks of several prominent names in finance and business have endorsed Bitcoin – from BVI hedge fund manager Paul Tudor Jones, to venture capitalist Chamath Palihapitiya, and billionaire investor Stanley Druckenmiller.
This week, Larry Fink, CEO of BlackRock BLK +0.3%, the world’s largest asset management firm with $7.5 trillion in AUM, stated that he believes Bitcoin can evolve to become a global market asset and that the currency will achieve new highs in the coming years. Fink also noted that the Bitcoin market cap is over $350 billion and has surpassed the size of global firms such as MasterCard MA -0.6% and Coca-cola.
Institutional attention to Bitcoin continues to be strengthened by three main drivers:
1. Historically Low Interest Rates – Federal Reserve Chairman Jerome Powell confirmed that we can expect near-zero interest rates for the foreseeable future, negatively affecting investors’ fixed-income portfolios in bonds and treasuries, and creating room for allocation into alternative investments.
2. Inflation – With the Federal Reserve targeting an average inflation rate of 2%, investors sitting on cash or low-yielding instruments are growing increasingly concerned about monetary devaluation.
3. Geopolitical Instability – As political tensions rise between U.S. and China, and the Dollar’s reserve currency status is increasingly questioned, holding a primarily USD-denominated portfolio poses an inherent risk to the long-term investor.
Recognizing these risk factors, public companies such as MicroStrategy MSTR +1.6%, Square SQ +2.3% and Mode Global, have chosen Bitcoin as a tool to hedge against currency risk. Many retail investors have followed suit, holding onto their Bitcoin tighter than ever. In fact, more than 60% of all Bitcoin in the circulating supply has not moved in the last 12 months. Current Bitcoin price predictions range from $200,000 per Bitcoin to $300,000 over the next 24 months, encouraging investors to continue to stockpile the digital asset.
As this bullish Bitcoin trend continues, another line of business has emerged – interest-bearing products for cryptocurrencies.
Products like BlockFi, Nexo and Celsius provide interest-bearing accounts earning 6% to 12% APY on their Bitcoin holdings. For investors anticipating that Bitcoin will continue to rise in price, interest-bearing accounts are a great solution to maintain cash flow without selling any of the appreciating digital asset.
About Jaime Bonetti Zeller
Jaime Bonetti Zeller is an investment professional and entrepreneur with businesses in multiple industries. He is president of Servicios Consulares Eurodom, the local partner in the Caribbean region for VFS Global, a leader global outsourcing and technology services specialist for diplomatic missions and governments worldwide. Jaime Bonetti Zeller also started the company Sofratesa de Panama inc., an organization in the engineering services industry located in Panama City.