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How Long Do Investors Plan to Hold Onto Bitcoin?

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How Long Do Investor Plan to Hold Onto Bitcoin?

How Long Do Investors Plan to Hold Onto Bitcoin?

Did investors buy bitcoin because it was trendy, or are they committed to cryptocurrency for the long haul?

As in any new and rapidly-growing market, this kind of investor intent and the overall feeling of market sentiment matters a lot. That’s because there are no historical averages or ratios to apply as baselines for value, and if things head south there is always the possibility of a mass exodus.

Buy, Hodl, and Prosper?

Today’s infographic comes to us from Raconteur, and it helps map out the future price expectations of crypto investors, along with how long they plan to hold onto their digital assets.

But before we get to that, let’s look at why investors bought into the market in the first place:

Reasons for buying Bitcoin:Share
I believe Bitcoin is a world-changing technology41%
A long-term store of value like gold or silver22%
A friend, family member, or trusted source convinced me15%
The price is low and will go higher14%
For transactions or purchases and less of an investment8%

When did people get into the market?

More than 60% of investors got involved in cryptocurrency in 2017, and 56% of investors that hold crypto plan to buy more in the next 12 months.

Future Expectations

What do people expect crypto prices to do in the future, and how long are investors willing to hold?

According to a survey of 1,800 crypto investors around the world at the end of March 2018, a whopping 77.9% see the crypto market gaining more than 30% in value over the next three years.

Meanwhile, another poll from November 2017 asked investors how long they will hold onto their assets:

How long will investors hold onto Bitcoin?Share
>10 years12%
7-10 years10%
4-6 years22%
1-3 years40%
<1 year16%

Only 16% of respondents planned to sell within the next year, and 44% of respondents said they’d hold onto Bitcoin for four or more years.

Concerns About Exchanges

Exchanges are the lifeblood for buying or selling cryptocurrency – so what are the major concerns held by investors about them?

Concerns about crypto exchangesShare
Security40%
High trading fees37%
Lack of liquidity36%
Response time from support team33%
Lack of crypto pairs22%
User friendliness and poor platform interface21%
High withdrawal fees18%
None9%

Security continues to be a topical issue for traders, which is not surprising since it’s estimated that $1.2 billion of crypto has been stolen since 2017. Other issues like high trading fees and the lack of liquidity and lack of currency pairs also poll high.

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Markets

How Disinflation Could Affect Company Financing

History signals that after a period of slowing inflation—also known as disinflation—debt and equity issuance expands.

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Chart showing U.S. Equity Issuance Deal Value from 1980-2000. Equity Issuance goes up over time, with the 300% increase in 1983 highlighted at the end of the disinflation period.
The following content is sponsored by Citizens Commercial Banking

How Disinflation Could Affect Company Financing

The macroeconomic environment is shifting. Since the second half of 2022, the pace of U.S. inflation has been dropping.

We explore how this disinflation may affect company financing in Part 2 of our Understanding Market Trends series from Citizens.

Disinflation vs. Deflation

The last time inflation climbed above 9% and then dropped was in the early 1980’s.

Time PeriodMarch 1980-July 1983June 2022-April 2023*
Inflation at Start of Cycle14.8%9.1%
Inflation at End of Cycle2.5%4.9%

* The June 2022-April 2023 cycle is ongoing. Source: Federal Reserve. Inflation is based on the Consumer Price Index.

A decrease in the rate of inflation is known as disinflation. It differs from deflation, which is a negative inflation rate like the U.S. experienced at the end of the Global Financial Crisis in 2009.

How might slowing inflation affect the amount of debt and equity available to companies?

Looking to History

There are many factors that influence capital markets, such as technological advances, monetary policy, and regulatory changes.

With this caveat in mind, history signals that both debt and equity issuance expand after a period of disinflation.

Equity Issuance

Companies issued low levels of stock during the ‘80s disinflation period, but issuance later rose nearly 300% in 1983.

YearDeal Value
1980$2.6B
1981$5.0B
1982$3.6B
1983$13.5B
1984$2.5B
1985$12.0B
1986$24.2B
1987$24.9B
1988$16.9B
1989$12.9B
1990$13.4B
1991$45.2B
1992$50.3B
1993$95.3B
1994$63.7B
1995$79.7B
1996$108.7B
1997$106.5B
1998$97.0B
1999$142.8B
2000$156.5B

Source: Bloomberg. U.S. public equity issuance dollar volume that includes both initial and follow-on offerings and excludes convertibles.

Issuance grew quickly in the years that followed. Other factors also influenced issuance, such as the macroeconomic expansion, productivity growth, and the dotcom boom of the ‘90s.

Debt Issuance

Similarly, companies issued low debt during the ‘80s disinflation, but levels began to increase substantially in later years.

YearDeal Value Interest Rate
1980$4.5B11.4%
1981$6.7B13.9%
1982$14.5B13.0%
1983$8.1B11.1%
1984$25.7B12.5%
1985$46.4B10.6%
1986$47.1B7.7%
1987$26.4B8.4%
1988$24.7B8.9%
1989$29.9B8.5%
1990$40.2B8.6%
1991$41.6B7.9%
1992$50.0B7.0%
1993$487.8B5.9%
1994$526.4B7.1%
1995$632.7B6.6%
1996$906.0B6.4%
1997$1.3T6.4%
1998$1.8T5.3%
1999$1.8T5.7%
2000$2.8T6.0%

Source: Dealogic, Federal Reserve. Data reflects U.S. debt issuance dollar volume across several deal types including: Asset Backed Securities, U.S. Agency, Non-U.S. Agency, High Yield, Investment Grade, Government Backed, Mortgage Backed, Medium Term Notes, Covered Bonds, Preferreds, and Supranational. Interest Rate is the 10 Year Treasury Yield.

As interest rates dropped and debt capital markets matured, issuing debt became cheaper and corporations seized this opportunity.

It’s worth noting that debt issuance was also impacted by other factors, like the maturity of the high-yield debt market and growth in non-bank lenders such as hedge funds and pension funds.

Then vs. Now

Could the U.S. see levels of capital financing similar to what happened during the ‘80s disinflation? There are many economic differences between then and now.

Consider how various indicators differed 10 months into each disinflationary period.

January 1981April 2023*
Inflation Rate
Annual
11.8%4.9%
Inflation Expectations
Next 12 Months
9.5%4.5%
Interest Rate
10-Yr Treasury Yield
12.6%3.7%
Unemployment Rate
Seasonally Adjusted
7.5%3.4%
Nominal Wage Growth
Annual, Seasonally Adjusted
9.3%5.0%
After-Tax Corporate Profits
As Share of Gross Value Added
9.1%13.8%

* Data for inflation expectations and interest rate is as of May 2023, data for corporate profits is as of Q4 1980 and Q1 2023. Inflation is a year-over-year inflation rate based on the Consumer Price Index. Source: Federal Reserve.

The U.S. economy is in a better position when it comes to factors like inflation, unemployment, and corporate profits. On the other hand, fears of an upcoming recession and turmoil in the banking sector have led to volatility.

What to Consider During Disinflation

Amid uncertainty in financial markets, lenders and investors may be more cautious. Companies will need to be strategic about how they approach capital financing.

  • High-quality, profitable companies could be well positioned for IPOs as investors are placing more focus on cash flow.
  • High-growth companies could face fewer options as lenders become more selective and could consider alternative forms of equity and private debt.
  • Companies with lower credit ratings could find debt more expensive as lenders charge higher rates to account for market volatility.

In uncertain times, it’s critical for businesses to work with the right advisor to find—and take advantage of—financing opportunities.

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