(Article contributed by Josh Vazz, a crypto investor and enthusiast)
In all my years of HODLing $BTC and $ETH, I have had my fair share of volatility.
Nonetheless, I have never experienced a day as grim as stockholders of Netflix were subjected to recently. The price of Netflix stock ($NFLX) fell by more than 35% in just one trading session as the company reported that it lost hundreds of thousands of subscribers in Q1, 2022.
Netflix had been a WallStreet favorite for years and is included in the acronym FAANG which is short for the group of tech stocks including:
- Meta ( $FB ) (formerly Facebook)
- Amazon ( $AMZN )
- Apple ( $AAPL )
- Netflix ( $NFLX )
- Alphabet ( $GOOG )
These stocks could do no wrong during the last bull cycle in the USA stock market which was one of the longest in history.
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As investors start to take a ‘risk-off’ approach to their portfolios due to current macro-economic conditions, tech stocks and other assets considered ‘risk-on’ assets are being meticulously scrutinized and quickly dumped on the slightest notion of future revenue or growth being in jeopardy.
This is exactly what happened to Netflix as it erased $54 Billion of market cap in a matter of hours.
This brings Netflix to a loss of almost 70% from the ATH it experienced in November, 2021 when it touched $700. Drops in stock prices like these make me remember BTC and ETH are not as volatile after all, with Bitcoin down around 40% from ATH.
As a HODLer, I find comfort knowing that one attribute that BTC and ETH holders have that most traditional stockholders do not is an ethos of loyalty and idealism.
In a nutshell, the ethos of Bitcoin, which is the precursor to all cryptocurrencies, is rooted in cypherpunk philosophy since they were the early adopters of BTC. This philosophy is deeply concerned about privacy in a world where privacy is a luxury that is rapidly disappearing.
Cypherpunks also deeply distrust the current powers that be including big tech, government, financial institutions… At the extreme, it promotes crypto anarchy which most Bitcoin holders do not subscribe to in today’s world. In the current spectrum of BTC holders, Cypherpunks are now a small minority but their influence and rebellious tone have been ingrained into the ethos of crypto holders albeit to a much lesser degree.
The average Bitcoin holder today is discontented with the current system but does not want to do away with it completely. They aspire to aid and reform the current powers to make them more transparent and fair for everyone. If some legacy institutions need to completely be overhauled, that is ok as well. They believe blockchain technology can provide profound improvements in many areas of our societies and our daily lives, if it is allowed to, without having to sacrifice privacy.
In this regard, holding Bitcoin is a peaceful way of protesting against the abuses of financial and economic power, at the same time, pointing the current powers that be to better solutions in other areas as well that leverage the enormous computational power we currently have at our disposal using the flexibility afforded by smart contracts as seen with use cases on ETH growing exponentially in the areas of Decentralized Finance (DeFi), DAOs, NFTs etc.
These strong-rooted ideals are not found among stockholders of Netflix, for instance.
When it comes to most stocks, the big institutional investors run their analysis and make their calls. If the stock is not performing according to their metrics, there are many other stocks to own and they will sell that stock expeditiously without the slightest sense of attachment.
In fact, attachment to a stock is a silly downfall that can cost you a lot of money in the eyes of big institutional investors.
In 2021, we experienced a rise in institutional investors in the cryptosphere but they still represent less than 10% of total holders by most estimates.
Institutions, in general, treat BTC and ETH as any other risk-on asset, and as their presence grows in the crypto space, the high correlation to tech stocks could persist. On the other hand, the HODLing ideology of retail investors and the battle cry of the BTC and ETH maximalists, enthusiasts, and HOLDers, puts a hard floor on BTC and ETH when their prices crash.
When prices drop dramatically, true HODLers just see an opportunity to buy more crypto at a discount and know the price will eventually rise again. By now, we know that crypto is unstoppable and continues to strengthen its fundamentals. We also now have exceptions on the institutional side with the likes of Microstrategy and Tesla that have proven to embrace the HODLing ethos of BTC on their balance sheets.
A recent article published on Glassnode in April 19, 2022, separates the entire BTC cohort into 2 distinct groups:
- Short Term Holder (STH)
- Long Term Holders (LTH)
According to Glassnode, Long Term Holders of Bitcoin are those that have held BTC for a period longer than 5 months. A market review from Genesis, published in February 2022 shows that 80% of holders of BTC are in fact LTH.
Here is what Glassnode said about LTH behavior:
“These investors have weathered significant volatility, yet continue to hold. This supports the notion that these investors are a relatively price insensitive bunch, and remain the least likely to exert sell-side pressure.”
The ultimate Long Term Holder of all time is, of course, the elusive Satoshi Nakamoto with a stash which is estimated to be around 1.1 Million BTC that has never moved since it was originally mined at the inception of BTC.
Since then, the price of BTC has seen extreme downturns as steep as 90% from ATHs. Many stocks that experience this severe weather will never come back to set a new ATH, but BTC and ETH have done this multiple times in a relatively short period of time.
One reason could be attributed to the HODL mentality as long term ideals and vision are vanishing elsewhere in the investment world.
Stocks live for the next quarter. Bitcoin and Ethereum don’t care so much about the next quarter as they do about the next decade and beyond because the vision is much wider in scope.
RECOMMENDED READING: An Introductory Guide into Quantitative / Algorithmic Trading in Crypto
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