There are numerous reasons why people choose to invest or buy cryptocurrency. The most outstanding reason is however strongly rooted on financially motivated choices. Cryptocurrency is for sure an investment object. For the numerous investors, the hope is that with time the currency they are buying will be worth more than the current buying price.
This perceived future benefit explains the exact reason why people invest more on cryptocurrency. On the other hand, it is a clear indication of how people make money on cryptocurrencies. There is always a tendency to invest in lesser known and sell when prices are up for the intention of growing fortunes.
Clearly, this move in any business is what is commonly known as hoarding. The fascination for digital trading and fortune making has become a hobby to many. With the continued desire to make money from selling later, many investors keep track with the stock market speculation in prices.
Most investors in cryptocurrencies, especially Bitcoin, have been cited to have developed a culture of holding. They now major more on accumulation rather than spending. There is a need to have Bitcoin rise up to attract a mass appeal and become a viable electronic alternative to ordinary currency.
But with the present desire of investors in cryptocurrency to hold or hoard, the digital asset prices may experience a surge. Sell-off in the cryptocurrency market may be a characteristic of technical issues. But there is a single non-technical issue which connects with the fact that investors are often reminded of the scarcity of cryptocurrencies.
Hoarding by miners intensifies and increases the scarcity of coins in the cryptocurrency market. There is now a new paradigm that has emerged somehow. Bitcoin miners not only want to sell in the future when prices go up but also want to accumulate more.
In recent times China and the environmental regulations have put a stop to the mining industry. The reaction has however been faced by a fierce buying of more Bitcoins. Hoarding of Bitcoins is now the order of the day with the receding mining activities at bay. Although all this would eventually result in liquidations, the hoarding by miners may intensify in future.
What Cryptocurrency Miners and Holders are Currently Doing
Cryptocurrency miners are piling Bitcoin stock. This is driving a supply shock which means speculated further cryptocurrency gains in future. According to recent reports from cryptocurrency exchange, the long-term holders and miners are the forces behind these supply shocks. Of course, this is attributed to the fact that cryptocurrency appears more of an asset for investment.
The focus of the long-term holders has shifted from selling to becoming accumulators. They keep accumulating. On the other hand, the miners are now holding on to their mined coins and even small miners have started holding. This has already surpassed the 50% mark and this could further increase shortage in supply.
The supply shocks associated with increased demand is likely to put cryptocurrencies like Bitcoin in a strong place. Somehow Bitcoin could trend higher. Bitcoin is at the centre of a cryptocurrency that has been oversold and overbought. It simply means that there is still room for Bitcoin to shine and run the market.
What are the Risks of Hoarding?
One of the leading arguments against Bitcoin being used as a legal tender is the aspect of it being naturally deflationary. Besides, many critics have a notion that such a scenario will most likely result in hoarding. Various persons investing in cryptocurrencies will choose to stockpile huge amounts of Bitcoins for cash balance purposes.
They could have a point you know. Basically, the whole nature behind hoarding concept is itself flawed. The famous plot behind hoarding is the notion of an expected expansion in the future. But then, what if investor decides to hold a wallet of bitcoins, deciding not to sell?
Investors decide to hoard their Bitcoins majorly as a result of panic and tension in the market. There is a fear of crypto scarcity and this leads to a massive buying spree of Bitcoins and exchange traded funds for the future.
Unlike the ordinary assets, the digital assets, digital assets need capital mobilisation to set up a technical operation for mining and transactions. When investors hoard their holdings, then there is surely not enough capital to be mobilised to help set up a technology operation for transacting and mining.
What Others Believe about Hoarding Cryptocurrency as an Investor
Some critics have however come forward to cite that hoarding is not really an irrational act. This can be attributed to an act of saving and compare this to the aspect of holding a piece of land. It is simply the act of choosing to wait until a better option can be available. In a way, this is a form of delayed gratification in the cryptocurrency market.
The whole act of hoarding by investors they say is in fact guiding the cryptocurrency market into delivering what the investors want. The investors simply make a decision on how to direct their cryptos and in a way they just delay their supply. They accumulate more instead for a secured future prosperity.
The value of a Bitcoin is based on its level of demand thus equals the purchasing power of each Bitcoin. Such scholars believe that if a crypto investor hoards their supply, they are saving for better. This would be perceived as a chance for the coins to gain better. Holding Bitcoins, they say, is just like putting money on a piece of land in hope that the land’s value will increase in future.