One issue confounding the cryptocurrency market is the perception that it is a highly marketplace relative to traditional asset classes. As a result of that higher volatility, many crypto market participants are short-term traders, not long-term investors, which can contribute to more volatility.
Investors are often left pondering if digital currencies, such as bitcoin, are merely a hot trend or viable long-term investment.
“As in any new and rapidly-growing market, this kind of investor intent and the overall feeling of market sentiment matters a lot. That’s because there are no historical averages or ratios to apply as baselines for value, and if things head south there is always the possibility of a mass exodus,” according to Visual Capitalist.
Recent data indicate bitcoin ownership is increasingly evenly split among short-term speculators and market participants willing to hold the largest digital currency for long periods of time.
“Since December 2017, the amount of Bitcoin held by day traders has risen to 5.1 mln BTC, almost equaling the amount held by long-term investors — those who have held the coins for more than a year — which equals about 6 mln BTC, in what has been called Bitcoin’s ‘liquidity event,’” reports CoinTelegraph.
Deeper Into The Data
While 41% of investors polled believe bitcoin is a world-chaning technology, just 22% view the largest cryptocurrency as a store of value on par with gold or silver, according to data from Visual Capitalist.
Investors’ reluctance to embrace bitcoin as a long-term investment is tied to, among issues, concerns that prices are manipulated, security on cryptocurrency exchanges, lack of liquidity and high transaction costs.
Related: Yale’s Robert Shiller: Bitcoin an ‘Epidemic of Enthusiasm’
Still, some data points indicate investors are comfortable holding bitcoin over the long-term.
“According to a survey of 1,800 crypto investors around the world at the end of March 2018, a whopping 77.9% see the crypto market gaining more than 30% in value over the next three years,” reports Visual Capitalist. “Only 16% of respondents planned to sell within the next year, and 44% of respondents said they’d hold onto Bitcoin for four or more years.”
Exchange security is a major issue for investors because various media outlets have reported that over $1.2 billion in crypto has been stolen from exchanges around the world since the start of last year.
For more information on the cryptocurrency market, visit our Bitcoin category.