How 'HODL' would lead to incorrect Bitcoin prices?

Last Modified:7 Feb 2021 18:19:35

Is Bitcoin a decorative commodity or a physical currency?

Most of those who have bought Bitcoin literally have Bitcoin under the term of HODL. In tahis article, we are going to explain how this term would lead to incorrect Bitcoin prices. But first, let's see what the meaning of HODL is.

This term originated on 18 December 2013. It happened when someone in Bitcointalk Forum was talking about the actions that could be done with Bitcoin, but being drunk, he made a typo as HODL instead of the word HOLD, which means "to keep."

bitcointalk forum

What does it meaning of HODL?

It means holding Bitcoin for a long time so that its worth goes higher. There is an expression for this term in the Persian language. Holding particular goods so that their price rises is called hoarding. Any commodity, in case of being kept in hefty amounts, would become expensive because of a decrease in their supply and this is contrary to common market trends through which an increase of demand results in overpriced goods.


The one who keeps Bitcoin by this strategy, in fact, increases its price with a manipulated decrease in its supply. But the one who does such a thing, according to the theory of being more idiot than me (which means someone ready to buy overpriced goods) would be looking for someone else to quickly buy those goods even with a higher price and following this trend would result in the generation of a price bubble. The amount of this price bubble depends upon the extent of hoarded Bitcoins, and this price bubble can burst easily since we can witness a severe crash of prices in the market utilizing supply on behalf of hoarders.


For a commodity as Bitcoin, one can consider the above-mentioned issue from another perspective as well, which can cause the value of the Bitcoin market to seem unreal. But how does this happen? At first, let's see how the market value of Bitcoin is calculated.


Market value's rate is calculated by multiplying the price by the number of goods; while on 26 October 2020, this number was based on the circulation of 18,526,743 Bitcoins as the price of each was 12,997.09 USD. By multiplying these two numbers, the total Bitcoin market value is calculated. But the problem is that the HODLed Bitcoins must be subtracted from the number of Bitcoins in circulation, and that is where the real Bitcoin Market value can be evaluated. But how many Bitcoins are hoarded, and how many are still left uncalculated among the circulated Bitcoins?


1.8 million Bitcoin which is equal to 10 percent of the total Bitcoins, have not been transferred from the moment they have been generated. Knowing this fact, one million Bitcoins are supposed to be under the control of Satoshi Nakamoto, the unknown Bitcoin creator.


On the other hand, more than 57 percent of Bitcoins which is equal to 10,545,000 have not been transacted for more than a year and indeed they have been hoarded. Besides, 93 percent of Bitcoins had no transaction for over two weeks now.


Let us do the math with these numbers:

93% of Bitcoins do not affect the present price of Bitcoin, and the more realistic approach for calculating the market value is multiplying 7 percent of Bitcoins by the price of Bitcoin.



This means that instead of 240 billion Dollars market value, we have roughly 16 billion Dollars market value. Nevertheless, this calculation is based on the perception of having stable prices. In the meantime, when one of the crypto whales of the Bitcoin Market (which means those who have hoarded huge sums of Bitcoins) imports some of his hoarded Bitcoins in the market, Bitcoin prices drop drastically.


Through this strategy, which is hoarding Bitcoin and encouraging other people to hoard this commodity as well, an unrealistic Bitcoin price and value in the market will be generated. For unaware people who have recently joined this market, these unreal numbers would result in miscalculation. In fact, if we add these figures to the table of cryptocurrencies, the expected conclusion is that Bitcoin must be placed on the fifth rank of the table instead of the first.


At present, many Bitcoin supporters ask the newly joined members to hoard at least a little amount of Bitcoin. And this amount is the result of the number of Bitcoins and the world population (Twenty-one million Bitcoins divided by eight billion as the world population is equal to 0.002625 Bitcoins). This advertisement for hoarding is done on behalf of Bitcoin supporters, like the one reason for hoarding this cryptocurrency.


The bitter truth is that Bitcoin is not the common cryptocurrency that the majority of people are buying and selling. It is only a decorative commodity for hoarding by the limited number of hoarders with ambitions of achieving high prices. Bitcoin supporters claim that buying and selling this cryptocurrency is efficient. However, according to these data, it seems there are not many who use Bitcoin in their transactions, and these claims are unrealistic. Perhaps another cryptocurrency can overcome these problems and get the title of a real digital currency, but definitely, Bitcoin cannot own this title in its current form.