Grayscale has outlined the growing HODLing mentality from Bitcoin investors, rather than so-called speculators

By Selena On Aug 24, 2020

According to the latest Bitcoin digital asset management firm Grayscale’s report, the growing psychology of hodling from Bitcoin investors. The company also asserts that value hoarding investment assets such as Bitcoin are becoming more attractive to institutional investors. This could soon fuel a massive bull run.

The growing HODLing mentality from Bitcoin investors

Because Bitcoin is not a cash-generating asset, Grayscale emphasized, investors, cannot apply standard discounted cash flow analysis to model its present value. In many ways, Bitcoin’s valuation is similar to that of gold. Instead of depending on the cash flow, we can use relative pricing and supply/demand analysis to value Bitcoin as an investment.

Consequently, Grayscale has brought back some of Bitcoin’s value, such as its digital scarcity and its past decade’s price performance. Another metric mentioned by the company compared the approach from so-called speculators (coins belonging to investors that have moved in the past 90 days) and HODLers (coins stagnant for one to three years.)

According to Grayscale, the chart below looks promising for Bitcoin, as the number of hodlers is increasing compared to a small number of speculators in the market, whose structure is similar to that of early 2016.

Besides, the Bitcoin days destroyed (BDD) metric, which blocks the fake noise of high transaction volumes, also suggests that investors prefer to store their coins instead of spending them.

By examining other Bitcoin metrics, such as actual capitalization (taking into account the final price of all traded currencies) and the famous stock-to-flow model.

Grayscale concludes:

“Despite rising in value since the May 2020 halving, Bitcoin may still be undervalued.”

The primary cryptocurrency has finally begun to catch the attention of prominent traditional investors like Paul Tudor Jones III and MicroStrategy. Grayscale contends this is due to the growing demand for assets that serve as stores of value, such as gold and Bitcoin. Gold recently hit a new all-time high of over $ 2,000 per ounce, corresponding to BTC’s annual high of over $ 12,450.

Therefore, the report from Grayscale emphasizes that:

“The current market structure is reminiscent of early 2016, the period that preceded Bitcoin’s historic bull run. Bitcoin continues to command global investor attention, there is scant supply to meet growing demand, and the infrastructure is now in place to satisfy that demand.”

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