I first purchased Bitcoin (BTC 1.58%) on April 24, 2020, when the price of one token was roughly $7,509. This means that my position has generated a return of 158% (as of Oct. 13) in about 2 1/2 years. That's impressive any way you look at it, and that figure has far outpaced popular stocks like Apple and Costco Wholesale.
Even with such an outstanding investment gain, especially when compared to the S&P 500's total return of 34% during the same period, I have no intention of selling my Bitcoin holdings anytime soon. Here's why.
CRYPTO: BTC
Key Data Points
Not a good time for risky assets
After hitting an all-time high of nearly $69,000 per token last November, Bitcoin has fallen 72% (as of this writing). This has followed the general negative trajectory of the overall stock market as well.
Inflation started to surge more than a year ago, and it hasn't abated. This has forced the Federal Reserve to hike interest rates to slow down rising prices across the U.S. economy. Investors have soured on risky assets in favor of safer ones, and this shift has hurt Bitcoin and the cryptocurrency market as a whole.
Tightening liquidity, coupled with a softening economic environment, might pave the way for a recession in the near future. Consequently, this could mean even more downward pressure on Bitcoin in the foreseeable future.
Maybe I would've looked smart in hindsight had I exited my Bitcoin position at its peak in November last year, but it's difficult to correctly time the market on a consistent basis or call the exact top. And sitting on a paper gain of 158% right now might encourage one to sell and take the profits. But this is not my approach.
Keep a long-term mindset
Despite its price decline, Bitcoin has still generated an incredible return of nearly 14,000% since the spring of 2013. And to be clear, I remain extremely bullish on the world's most valuable cryptocurrency over the next decade. This is why I remain a holder.
Bitcoin is being viewed by a growing number of market participants as a legitimate store of value, the equivalent of digital gold. But Bitcoin is more divisible, useful, and portable than gold. And these key characteristics could propel the cryptocurrency's current market cap of $371 billion, bringing it closer to the $12.5 trillion total value of gold worldwide. Supporting my argument here is the younger generations' increasing familiarity with and appreciation of all things digital, a trend that will only strengthen.
Large corporations, like Block and MicroStrategy, have allocated portions of their balance sheets to Bitcoin. And big-time institutional investors are getting in, too. Ark Invest, the investment firm headed by Cathie Wood, is extremely bullish on Bitcoin. Additionally, Coinbase recently signed a partnership with BlackRock giving the massive asset manager's clients easy access to Bitcoin. Rising investor demand, especially for a digitally scarce asset like Bitcoin, helps to support a higher price over time.
I know the path to greater Bitcoin adoption will be full of extreme volatility, just as it has been in the past. But as long as I maintain a very long-term time horizon, as I do with my entire portfolio, then I have no doubt that I'll be able to maintain my conviction and remain a Bitcoin holder.
