The benefits of long-term crypto investing

Bitcoin is up 18% over the last 12 months. That’s slightly worse than the 24% gain in Apple’s stock price, and on a par with the 18% gain in the S&P 500 index.

Does this mean Bitcoin (BTC) has gone so mainstream that its annual returns are on a par with traditional stock investments?

Not quite.

Here’s how BTC has performed over the last four years:

Here’s another way to look at it: if you bought and held BTC on any day since its inception and held it for five years, the worst annual return you would have would be 27%.

“That’s a testament to the benefits of taking a long-term view of the crypto market,” says Brett Hope Robertson, head of investments at crypto company Revix.

“This means that even if you bought at the very worst time, but held for five years, you still made a 27% annual return. That means you would’ve outperformed about 99% of fund managers by simply picking the worst possible time to invest.

“Therefore, you have to have a long-term investment horizon in this game.”

Adoption is everywhere

The mainstreaming of BTC accelerated in the last 12 months. Most major banks now have crypto teams and are actively working on incorporating blockchain technologies and cryptos into their financial solutions.

El Salvador adopted BTC as legal tender in 2021, an ice breaker that is likely to be followed by others, but the real adoption is happening at the corporate level with companies like MicroStrategy, Tesla, Square and Galaxy Digital Holdings loading up on BTC as a ballast against an inflation-prone US dollar.

“We see crypto adoption at the corporate level continuing to grow in 2022, and we expect regulation to accelerate this trend,” says Hope Robertson.

“Regulations are coming to most countries in the next few years, and this will provide institutional investors [with] a level of comfort that is still lacking in this space. So this is definitely a positive move, and is bullish for BTC and some of the larger altcoins, such as ethereum and solana which are game-changers in the decentralised finance [DeFi] space.”

Hope Robertson points to several reasons which could point to why the crypto market is still seeing strong adoption through this dip and why corrections form opportunities.

1. Crypto is like early-stage tech investing. Throughout history, innovative tech has always brought volatility. Apple and Amazon experienced wild and volatile price gyrations in the early years of trading, so we should not be surprised at the volatility of BTC and other crypto assets.

2. The current pullback in crypto prices is merely history repeating itself: during the recent bull market, BTC experienced over six pullbacks of greater than 20%, and every time it has proceeded to rally more than it pulled back. The recent bitcoin pullback has been textbook in nature: bitcoin is now more than 40% off its all-time high of $69 000. While many believe that we will likely see a further fall to $32 000, marking the commencement of the ‘bear market’, a similar view to that was taken in July 2021 when BTC was toeing the line of $29 000. The truth is nobody knows what the market will do. But buying on dips of over 30% has historically played out to be a good long-term decision.

3. The bitcoin Fear & Greed Index is flashing “buy”. The Fear & Greed Index, shown below, gauges investor sentiment towards the market. The index is made up of multiple market factors such as volatility, momentum, social media and surveys. Every time the Fear & Greed Index has flashed “extreme fear”, it might as well have flashed “buy”.

4. The smart money is accumulating and holding bitcoin: one of the benefits of crypto investing is the type of analytics available from the blockchain. As seen from the chart below, long-term holders of bitcoin are in a peak accumulation phase. This means these investors (who can be viewed as smart long-term investors) are buying this recent pullback and will proceed to sell into the next move up.

5. Dormancy flow has been an accurate predictor of bear market bottoms: Entity-adjusted dormancy flow compares the bitcoin market capitalisation (the value of all bitcoins in circulation) to the annualised dollar value of coin dormancy (how long the coins traded have not been moved). This has been an historically reliable blockchain indicator and suggests bitcoin may be in the final stages of a bearish trend, having lost around 40% of its value in the past two months. The last time the index was this low the market bottomed at around $29 000 bitcoin and rose more than 130% to take the market to new all-time highs.

“While these indicators and stats do show long-term success, many investors get caught up in trading the asset on a shorter timeframe. Remember the worst five-year return in bitcoin’s history is 27% a year; the key here is a five-year timeframe,” Hope Robertson states.

But we can’t ignore the macro environment or the Fed

“All that aside, we must be wary of the macro environment in 2022.… It’s clear that, like tech stocks, the crypto industry is at the beck and call of the US Federal Reserve and its monetary policy decisions going forward. Being correctly positioned is critical. Thankfully crypto offers many options for less volatile returns if you wish it. Crypto bundles and USD savings vaults have become hugely popular in times of market uncertainty,” says Hope Robertson.

Where do I gain exposure?

One of the problems newcomers to crypto investors face is where to start. Hope Robertson says Revix has solved that problem by creating three different theme-based bundles.

The Top 10 Bundle is like the JSE Top40 or S&P 500 for crypto. It provides equally weighted exposure to the top 10 cryptocurrencies that make up more than 75% of the crypto market. This bundle has significantly outperformed bitcoin over the last 12 months.

The Smart Contract Bundle provides equally weighted exposure to the top five smart contract-focused cryptocurrencies such as ethereum, solana and polkadot. These cryptocurrencies allow developers to build applications on top of their blockchains, similar to how Apple builds apps on top of its iOS operating system.

The Payment Bundle provides equally weighted exposure to the top five payment-focused cryptocurrencies looking to make payments cheaper, faster and more global. These cryptos include the likes of bitcoin, ripple, stellar and litecoin.

About Revix

Revix brings simplicity, trust and great customer service to investing. Its easy-to-use online platform allows anyone to securely own the world’s top investments in just a few clicks.

Revix guides new clients through the sign-up process to their first deposit and first investment. Once set up, most customers manage their own portfolio but can access support from the Revix team at any time.

For more information, please visit www.revix.com.

Brought to you by Revix.

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