- Institutions don't come until it gets big enough
- Just keep on HODling and you get to rake in huge gains
The best way to weather the crypto market and earn serious gains on Bitcoin is HODLling.
All that an individual Bitcoin investor can do is HODL and they know it well and they do it well. As we reported, 11,580,000 Bitcoin hasn’t been moved in more than a year. This has been despite an 85% increase in BTC price during that time.
As Bitcoin enthusiast Rhythm Trader said, “Hodlers of last resort are insane.”
But this insanity can pay off extremely well because “Professional fund managers literally can’t hodl,” points out analyst Ceteris Paribus.
This deduction was highlighted in the Wall Street article “How You Can Get Big Gains That Wall Street Can’t.”
It reveals the “dirty secret” of the investment business that fund managers just don’t hold stocks and not because they don’t want to but because they simply can’t.
It has been found that small investors actually ave a “big edge” over the giants of Wall Street when it comes to capturing the gains. The reason is,
“to earn such superior long-term results, you have to withstand bone-cracking short-term downdrafts along the way—something most fund managers can’t do.”
It’s all about HODLing
The insight emerged from the analysis between a little known Jack Henry & Associates company and Warren Buffett’s Berkshire Hathaway.
If you’d invested $1,000 in Jack Henry stock at its closing price on Sept. 1989, you would have had a whopping $2,763,000 on Sept. 30, 2019.
Now, the same $1,000 invested in Berkshire Hathaway would have only grown to $36,000 and $16,000 in the S&P 500.
However, this would have only been the result of the determination, in other words, HODLing.
Because HODLing means weathering through the brutal winter of price drops and crashes. In the case of Jack Henry, it was in June 2001 through Oct. 2002 when the company's shares fell 67% and then the stock underperformed the S&P by 72% points between Oct. 1996 and August 1999.
But why can’t professional investors withstand this kind of pain?
David Salem, co-chairman of New Providence Asset Management, who has been behind this analysis says,
“It’s potentially career-ending for a manager to hold such big interim losers.”
As for small managers, they have to sell if the position gets too large and dominate their portfolios.
Small stocks actually earn their highest return when they migrate to large.
Institutions don't Come Until it gets Big Enough
As we saw in Jack Henry's case, the company first sold its shares to the public in 1985, 9 years after it was founded. But as of 1996, 41% of the stocks were owned by insiders and it wasn’t until 2006 did about 5% of the shares were owned by institutional investors.
It was in Nov. 2018 that the company grew to a size large enough to join S&P 500, where it currently ranks at 402nd. Now, 94% of its stocks are held by institutions.
This is yet another best-case scenario for buying and HODL.
As such, professional fund managers will “buy Bitcoin once it passes a couple Trillion” says Paribus. This means individual investors are in the best position to rake in gains by just keep on HODLing.