Experienced bitcoin investors are likely familiar with the terms “HODL” and “diamond hands,” which essentially mean the same thing: a willingness to hold onto a digital currency, say bitcoin, through the inevitable pullbacks and volatility.
Predictably, vernacular such as diamond hands breeds antonyms. In this case, that’s “paper hands,” or those market participants that are quick to dispose of their bitcoin stakes when times get tough. In what could prove to be good news for bitcoin itself and exchange traded funds such as the CoinShares Valkyrie Bitcoin Fund (BRRR ), some experts believe the recent turbulence experienced by the largest digital currency is serving the objective of chasing skittish investors from the market.
Should that thesis prove accurate, ETFs like BRRR could benefit because the bulk of the remaining investors in the bitcoin marketplace are likely to be devotees and those that are willing to wait near-term volatility in the hopes of long-term gains. Devotion alone isn’t a reason to get involved, but lack of it could be a contrarian indicator. Consider that data indicate a significant percentage of recent bitcoin selling occurred in wallets that were 90 days old or younger. Paper hands indeed.
‘Normal’ Bull Market Behavior
In a recent interview, BitMEX co-founder Arthur Hayes – a noted crypto expert and bitcoin bull – observed that bitcoin’s year-to-date movements aren’t unusual in the broader context of bull markets.
“This thing is a short-term pain. We’re clearing out the deadwood,” he said. “We had a great run from $20,000 to $110,000 on Bitcoin, essentially FTX low until TRUMP coin, and now we got a 30% correction. It’s pretty normal for a bull market. Yes, people might have had a little bit too much leverage.”
Hayes made another interesting point – one that implies bitcoin and BRRR could actually benefit if the U.S. economy contract. His argument is simple: if a recession arrives, the government would likely be forced to print more money to jolt economic activity, which would be inflationary. That could highlight bitcoin’s merits as an inflation-fighting asset.
“When there’s financial distress, they always print money. It doesn’t matter what the political leanings, left, right, center, print money,” added Hayes. “This is the system that we’re in. We need the stress. We know what the response is. Survive the stress, profit from the response and so that’s our goal as crypto investors.”
BRRR gained 5.60% last Friday.
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