By keeping bitcoin long-term rather than short-term, you reduce the risk of losing value due to short-term price fluctuations, while having the opportunity to benefit from long-term price appreciation.
Buying and selling bitcoins in short periods of time significantly increases the chance of your bitcoin losing value. Over the lifetime of bitcoin, we have seen that a much safer way to store bitcoin value is to buy it and hold it for the long term. This article shows that if you are buying bitcoin, you should hold it long-term rather than trying to trade it for a quick profit.
Bitcoin trading is riskier
Many people think of bitcoin as an investment because the price has increased so much over time and many people have become rich as a result. Bitcoin’s history of price appreciation and volatility reinforces the idea that to make a profit from bitcoin, you should buy and sell (trade) bitcoin.
However, the reality is that most people who attempt to trade bitcoins end up losing money. For a more detailed explanation of why we recommend most people not to try to trade bitcoin, read our article on bitcoin investment strategies.
Bitcoin is for saving and spending
The properties of bitcoin (which we will talk about a little later) make it very suitable for saving and spending. History has shown us that the safest and most reliable way to make a profit with bitcoin is to buy and store for a long period of time.
Bitcoin was originally created as an electronic cash system and can be used to make payments in ways impossible with traditional payment systems. For example, it takes days to send money across international borders, but bitcoin can be transferred globally in minutes.
Some of the properties that make bitcoin good for saving include:
- There will only ever be 21 million bitcoins and over 18 million of them are already circulating.
- Your bitcoin holdings cannot be diluted by printing money.
- Basic economics says that steady supply and growing demand should lead to price increases over time. The constant supply of Bitcoin is very predictable due to the transparent design of the system. The demand for bitcoin is expected to gradually increase over time because we are still at the beginning of bitcoin’s life.
- Bitcoin is easy to secure with a little knowledge. You can safely store a large bitcoin value quite easily, especially when compared to saving in gold or cash.
- Bitcoin cannot be easily confiscated in the same way as gold or cash.
Some of the properties that make bitcoin good for spending include:
- Bitcoin is purely digital. In the same way that we can send information over the Internet extremely quickly, we can send value on bitcoin much faster than sending it with traditional methods.
- Another advantage of the digital nature of bitcoin is that we can also divide it into much smaller units than traditional money (such as gold or dollars). This means that bitcoin can be used for a wider range of applications than traditional money.
- Bitcoin’s decentralized peer-to-peer design means you can make bitcoin payments 24/7/365, without having to rely on banks or other payment providers.
Bitcoin Price Trends
Here’s a chart of bitcoin’s price history, which supports most of the claims in this article:
In the chart above, you can see that the price of bitcoin has increased dramatically over time. With a few exceptions, if you bought bitcoin and held it for more than a year or two, you would have seen the value of your bitcoin increase. On the contrary, you can see that there were many times when trying to time the market would result in a sudden drop in value, such as in early 2018 and early 2022.
There are some really rough 1-2 year periods, but if you go back to a 5-year perspective, things get a lot more positive for Bitcoin holders.
History shows that if you were to buy and hold bitcoins for the long term, you would not be subject to these kinds of sudden losses. Instead, you would see the value of your bitcoin steadily increase over time.