Bitcoin Service ‘Hodling’ and Its Impact on Cryptocurrency Adoption and Liquidity
Wilma Woo | Sep 01, 2018 | 15:00
‘Hodling’ has not only become an important strategy for many bitcoin users but is also a major reason why Bitcoin remains the most valuable cryptocurrency on the market.
Crypto-Collateralized Loans Can Boost Bitcoin Price
For any non-technical Bitcoin investor who purchased holdings longer than a week ago, ‘HODLing’ has rarely seemed such an important part of their strategy. As a result of the downturn across cryptocurrency markets in 2018, the majority of investors who bought into Bitcoin 00 later than November last year will be nursing losses of up to around 70 percent of their initial buy-in.
While Bitcoin losing value against the US dollar is no longer the cause of panic that it once was, the comedown from all-time highs around $20,000 continues to shape the market, both in terms of liquidity and adoption.
In a protracted bear market, fewer coins change hands as holders keep their assets as long as possible.
The current phase in the life of Bitcoin has become the subject of significant volumes of research from both within and outside the cryptocurrency industry.
As Bitcoinist reported earlier this month, for example, a significant portion of the total Bitcoin supply has circulated over the past year, in comparison to altcoins such as Bitcoin Cash, the vast majority of which is held in static wallets and never ‘used.’
At the same time, current data suggests around half of the available bitcoin is in long-term storage, while the other half actively circulates. Lending services like Inlock, for example, which locks up cryptocurrency as collateral in exchange for cash, can essentially reduce the circulating supply of bitcoin putting upward pressure on its price.
As various commentators espy an upturn in prices towards the end of this year, meanwhile, any significant changes will affect investor appetites to ‘HODL,’ and with it reshape the market once again.
Lending Services Provide Flexibility
The cycle of HODLing in a bear market and trading in a bull market is now also well documented. Data compiled by Bitcoin lending platform Unchained Capital shows 2018 as the fourth episode in a series of cycles of price peaks followed by protracted corrections and repeat (higher) price peaks.
Due to increasing adoption and fundamental stability in Bitcoin, however – something which was lacking even one year ago – it has become easier for consumer-focused businesses to impact on the investor habits by offering alternative options to the simple HODL-or-trade ultimatum.
“HODLers are the true heroes of the cryptospace,” said Inlock CMO, Peter Gergo. “They hold their digital assets strong even during bearish sentiment which slows the downward movement and controls supply – which eventually results in turning the tides.”
Now imagine what will happen when Inlock will provide access to the purchasing power of these assets while they still be able HODL. As a whole new perspective opens up it is going to be interesting to see the long term effects.”
Developing in tandem with futures and other products for institutional investors, these consumer products likewise offer the ability to profit from Bitcoin, regardless of whether prices are trending up or down.
InLock represents one of the first movers in a fledgling industry – lending of fiat currency using cryptocurrency as collateral.
A successor to well-known P2P lending schemes such as Bitbond and BTCJam, InLock’s style of lending aims to cushion non-technical investors against wild price swings. Even if Bitcoin tanks significantly within a short period and a debtor’s crypto-collateral in liquidated, the fiat cash would still be available, allowing a new buy-in at current rates.
[Full disclosure: The author of this article is a supporter of the given project and is a holder of ILK tokens.]
How long do you think the bear market will last before HODLers become SODLers? Share your thoughts below!
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