Wall Street analyst makes an evidence-based case for holding (or ‘HODLing’) bitcoin for long term

Looking through the lens of stock investing, a Wall Street analyst says bitcoin is an attractive buy while it remains under pressure here.

If an investor didn’t hold stocks through the 10 best days for the S&P 500 each year, the annualized return would drop to 5.4 percent from 9.2 percent, Thomas Lee, head of research at Fundstrat Global Advisors, said in a Wednesday report.

Similarly, “the reason ‘buy and hold’ (or HODL) makes sense for BTC is that a handful of days each year account for the bulk of gains for BTC,” Lee said. “For instance, in 2017, a total of 12 days represent the full-year return of BTC.”

Bitcoin’s astronomical rise over the last five years

Source: CoinDesk

“HODL” emerged from a misspelling of “hold” in an early bitcoin forum message that many speculated was written by a bitcoin trader who was thought to be drunk.

Investors in the traditional equity market are generally advised to buy and hold stocks, rather than trying to time trades at the cost of missing out on price gains.

However, it’s not clear whether historical analysis on the decades-old stock market is appropriate for the far more volatile cryptocurrency that’s less than 10 years old.

Lee found that in the five years since 2013, the full-year gains of bitcoin were achieved in an average of nine days. In comparison, he said the analysis for the S&P 500’s performance stretches back to 1954.

Bitcoin has struggled to recover above $8,000 in the last three days and is down more than 40 percent for the year so far, after multiplying more than 13 times in price in 2017, according to CoinDesk’s bitcoin price index.

Investors who didn’t hold onto bitcoin in the past would have suffered. Excluding its top ten days of performance every year, bitcoin has fallen 25 percent annually from 2013 to 2017, Lee said.

“We think investors should be patient buyers of BTC here,” he said.

Lee was chief equity strategist at J.P. Morgan Chase before co-founding Fundstrat in 2014. He issued his first formal report on bitcoin in July and remains the only major Wall Street strategist to do so. On Wednesday, Lee maintained his mid-year bitcoin price target of $20,000 and $25,000 for the year-end.