28 Mar Analyst Tom Lee: HODL and avoid altcoin “purgatory”
In his latest Fundstrat Global Advisors’ client newsletter, Tom Lee makes a compelling case for buying and holding cryptocurrency. In short, he says, market timing is only for experts and rarely works whether it’s traditional stock markets or cryptocurrency trading.
“To best illustrate this, if an investor missed out on the 10 best days (for S&P 500) each year, the annualized return drops to 5.4% (ex-10 best), from 9.2%. In other words, the case for buy and hold in equities is the opportunity cost of missing out on the 10 best days. In other words, for most risk profiles, investors should HOLD Bitcoin (HODL is an intentional misspelling of Hold).”
Lee backs up his point with some new research. For example, he says the 10 best days for bitcoin in 2017, showed a return of 1,136%. The remaining 355 days showed a return of 232%. “In other words, just a handful of days account for the bulk of gains,” he writes.
In 2017, the 12 best days for bitcoin represented the full year’s return. “We are not saying BTC only rose in 12 of the days. Rather, we are saying that timing BTC purchases would have been challenging, since only a handful of days account for the full year gains.”
It’s simply too difficult for the average investor to have perfect timing when the returns can still be substantial and less risky using a buy and HODL strategy.
Bitcoin near bottom
Lee and his analysts maintain bitcoin is near its market bottom and reflects the actual cost of mining the cryptocurrency. “We think investors should be patient buyers of BTC here. We think risk/reward is attractive and given the “purgatory” period for alt-coins, advise investors to stick with large liquid tokens.”
So far this year, Fundstrat has consistently recommended staying with the more established coins such as bitcoin, Ethereum, Ethereum Classic and NEO.
He says the typical altcoins cycle is Bull… Bear… Purgatory… REPEAT. “We are in [altcoins] purgatory now” as the following chart shows:
Lee expects the altcoins “purgatory” to remain until mid-August to mid-September until clearer regulatory directions are available from the SEC.
For cryptocurrency traders, Buy and HODL may be advice you can take to the bank by the end of the year.
For more detailed technical analysis, contact Fundstrat directly.
Editor’s note: Information on Blockcoin Today is not intended as investment advice. Please consult your own investment advisors for appropriate guidance and counsel.