This is probably the most controversial topic, is Bitcoin worth holding? I get tonnes of questions asking how my ‘Bitcoin’ investments are going, and the truth is that I do not hold any Bitcoin (for a long period of time) and will likely never hold a significant amount.
This article will explain both sides to holding Bitcoin, the short answer is it depends on both your risk tolerance and your ability to be active within the market.
To begin, let’s look at Bitcoin’s performance compared to the following 6 Altcoins in the 2017 Q4 BULL market.
||Price on 1st December 2017 (USD)
||Price on 7th January 2018 (USD)
This table clearly shows that Bitcoin is the worst performer in terms of ROI during bull markets.
The reason for this is due to the enormous market cap in comparison to other coins, Bitcoin’s market cap is currently sitting at 160 Billion USD, with the second highest cryptocurrency, Ethereum sitting at 75 Billion. In order for BTC to double in price, the market cap will need to double (given static supply).
The amount of capital needed for this is significant when you compare it to coins with market caps less than 0.3% of the overall dominance. I said in December that Bitcoin’s dominance (% of overall market cap) will fall to around 25% over the next couple of years. I strongly believe that other promising projects will start to eat up Bitcoin’s market dominance.
Don’t believe me?
Historically, Bitcoin’s dominance was relatively stable at 80%.
In 2017 this all changed.
Bitcoin’s dominance was historically high for a few reasons:
- Dominant Trading Pair
On most Altcoin exchanges, Bitcoin was the only trading pair you could use. Keeping Bitcoin’s dominance high. This drastically changed in 2017 when most exchanges opened up ETH and USDT markets, there is now faster and cheaper alternative trading pairs which investors can choose.
When large Altcoin exchanges introduce Fiat to Altcoin markets, Bitcoin’s dominance will continue falling.
- There was little interest in other cryptocurrencies
Bitcoin is seen as the king crypto, it is the origin cryptocurrency that has inspired many developers to create better cryptocurrencies. Before 2017, Bitcoin was viewed as the only significant cryptocurrency. However, thanks to Smart Contracts allowing developers to easily create their own ‘tokens’ the altcoin market has boomed significantly in 2017 and investors are looking into other platforms that are claiming to be the 2nd
generation of blockchain.
3… Outdated tech
Bitcoin is commonly referred to as the 1st
generation of cryptocurrencies, and Bitcoin enthusiasts will hate me for saying this. Bitcoin is slow, has significantly high transaction fees and encounters scalability issues all the time. With that being said, it can be changed and evolve to address these issues but getting consensus on this is what leads to hardforks such as Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond and so on. The future of cryptocurrencies will be instant, almost fee free and infinitely scalable, this is not Bitcoin in its present form.
Ok, so now I’ve demonstrated that Bitcoin performs the worst and presented a case for it losing market dominance over time.
Why would anyone hold onto Bitcoin?
As much as Bitcoin goes up the least, it also falls the least during bear markets too.
A lot of investors sell their altcoin holdings for Bitcoin ahead of an anticipated crash or during a downtrend. This causes altcoins the lose a significant amount more than BTC.
Here’s the performance of the top 7 coins including BTC during the Q1 downtrend of 2018.
||Price on 7th January 2018 (USD)
||Price on April 9th 2018 (end of bear market)
The only coin that performed better than Bitcoin on that list was EOS, note that this is the exception to the trend. MOST coins lost more value than Bitcoin.
That is the main reason why people hold Bitcoin, it is the safest cryptocurrency to hold (I say safest with a pinch of salt, none of these coins are ‘safe’ as such).
To conclude, I don’t hold any Bitcoin for the above reasons. If I anticipate the markets falling then I will sell into Fiat and preserve my capital. Some people invest in Bitcoin because they believe it’s the future of money, others because they don’t know of any other cryptocurrencies. Either way, there is no right or wrong answer.
As an investor I am seeking the highest return on my investment, and in 2018 this is certainly not Bitcoin.
I hope you’ve enjoyed this article, any questions just let me know.
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