Bitcoin may yet go below $20,000, but holding remains a successful strategy, according to research.

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The vast majority of Bitcoin investors who kept the cryptocurrency over its difficult moments have profited.

Exiting Bitcoin (BTC) spot bets when it begins to drop dramatically after reaching all-time highs is a terrible investing decision, at least according to its historical price behavior.

Over the course of its eleven-year existence, the flagship cryptocurrency has seen several bullish and negative cycles. The BTC/USD exchange rate usually climbs in a parabolic fashion. It then shaves off more than half of those profits as profitable traders sell the peak. At the same time, traders who acquire bitcoin at its local high experience extended durations of loss.

Got Bitcoin? Chances are you’re in profit

However, Bitcoin’s general historical price tendency remains tilted to the upwards.

After each bullish-to-bearish cycle, the cryptocurrency bottoms out and then rises to reach new all-time highs.

Its weekly timescale chart shows the price making a series of successive higher highs separated by years: $500 in November 2015, $768 in June 2016, $2,998 in June 2017, $19,891 in December 2017, $41,986 in January 2021, and $64,899 in April 2021.

Bitcoin’s bullish and bearish cycles over the recent years. Source: TradingView

In a tweet Friday morning, PlanB, the brain behind the widely-circulated Stock to Flow model, which anticipates the Bitcoin price at $288,000 by 2024, pointed to the cryptocurrency’s capacity to deliver gains to patient investors. The pseudonymous analyst noted that not a single investor who held Bitcoin for more than four years ever suffered losses.

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He referred to the 200-weekly moving average curve as an unseen price floor that kept bitcoin’s bullish bias upward amid negative declines. On its downwards swings, the BTC/USD exchange rate challenged the aforementioned support wave, only to bounce to newer highs.

The red to orange transformation in the chart above shows Bitcoin’s bullish exhaustion following its 2020-2021 price boom. Source: PlanB

The announcement came as the Bitcoin price began to show symptoms of diminishing bullish momentum. The BTC/USD exchange rate peaked above $65,000 in mid-April before falling to as low as $30,000 on Coinbase nearly a month later. The pair’s bid among dealers was close to $37,000 as of May 28.

Meanwhile, PlanB’s long-term objectives make Bitcoin look to be an asset that would keep capital from leaving established markets. The expert previously stated that he expects people to acquire the cryptocurrency because of its inherent scarcity – there can only be 21 million BTC in existence.

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“Silver, gold, countries with [a] negative interest rate (Europe, Japan, US soon), countries with predatory governments (Venezuela, China, Iran, Turkey, etc.), billionaires and millionaires hedging against quantitative easing (QE), and institutional investors discovering the best performing asset of last 10 yrs” will influence people to seek safety in bitcoin, wrote PlanB in his 2019 paper, “Modeling Bitcoin Value with Scarcity,” as he envisioned a trillion-dollar market cap for the cryptocurrency.

Bitcoin still following the Stock-to-Flow model price trajectory. Source: ByBt.com, PlanB

The model encourages investors who purchased Bitcoin for roughly $65,000 to retain the commodity even if it takes more than four years to break even. This is only true if Bitcoin maintains its stock-to-flow price model trajectory.

Based on the same bullish model, a logarithmic curve chart predicts that BTC/USD values will fall to $20,000 or below. After drawing a Fibonacci graph between the curve’s upper and lower bands, the downward goal appears. Its maximum variance is roughly $111,590, while its minimum departure is approximately $17,150.

Bitcoin oscillator and price curve trajectory shows sign of bearish reversal. Source: Bybt.com

The logarithmic curve’s historical significance in predicting price bottoms and tops makes it relevant enough for investors to realize their potential long and short targets.

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Too unrealistic?

Despite its accuracy, the stock-to-flow model and its variations have been chastised for their unrealistically positive depictions of scarcer assets. In November of last year, Charlie Morris, co-founder and CIO of crypto data business ByteTree, stated that bitcoin’s lower supply vs increasing demand does not ensure higher pricing.

People will still be able to sell bitcoin from active supply to fulfill market demand, according to Morris.

 

Nico Cordeiro, chief investment officer and fund manager at Strix Leviathan, similarly questioned the main premise of scarcity-based Bitcoin pricing models, saying that no evidence demonstrates that supply affects the US dollar market worth of monetary products (gold, silver, or Bitcoin).

Past performance is not a guarantee of future outcomes. However, with Bitcoin gaining traction among institutional investors in the aftermath of lower-yielding investment safe-haven options (government bonds, the US currency, and so on), it appears enticing to many to just “hodl” the token till further notice.

 

 

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