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To HODL or not to HODL: Bitcoin ETFs poised to redefine crypto investment philosophies

By Jessica Penny
5 minute read

A market expert says that a core approach for many dedicated bitcoin investors may soon be overshadowed by “opportunists” attracted to the asset in an ETF wrapper.

More than 10 years ago in an online crypto forum, a user mistakenly spelt the word “hold” as “hodl” and inadvertently kickstarted the well-known “Hold On for Dear Life” philosophy – the belief that investors should not sell their crypto even when markets dip or appear volatile.

Until recently, investors could only buy bitcoin directly through dedicated crypto exchanges. Given the asset’s historic divisiveness, “HODLing” bitcoin requires not only a strong will to stay the course amid frequent market fluctuations but also confidence that, despite bitcoin’s reputation for being largely unregulated and considerably risky when tapped into directly, it is worth holding onto.

But the introduction of spot bitcoin exchange-traded funds (ETF), which invest directly in the cryptocurrency or access it via a fund, now offer a more accessible, safeguarded, and straightforward means of participating in the space.


Speaking to InvestorDaily, AMP chief economist Shane Oliver suggested that the introduction of these bitcoin ETFs, which have gained traction in the Australian market in recent weeks, might dilute the HODL perspective.

“A lot of the people who were getting into [bitcoin] before were committed to it, in a way, saw it as the currency of the future, of the store of value of the future,” Oliver said.

“Now, you might find people getting in just opportunistically. They think, ‘Well, I don’t really believe in [bitcoin] but now that it’s in an ETF that gives it a degree of institutional support, perhaps maybe I’ll have a go. Of course, if it doesn’t work out, then I’ll be off.’ New buyers may be less committed to it. Previously they were, so it will be interesting to see how it plays out.

“So yes, there’s a bunch of people who will buy and HODL … but there’s also a huge investor flow in and out over time, as it goes in favour and then goes out of favour again. And we’ve seen that several times over the last decade or so.”

Earlier this week, bitcoin dipped below US$65,000 for the first time in over a month, coinciding with a significant outflow from digital asset investment products which suffered a setback totalling US$600 million, the largest since mid-March.

Outflows were mostly made up of bitcoin, which saw a loss of US$621 million.

In conversation with InvestorDaily, Binance ANZ general manager Ben Rose said that the nascent nature of the asset class means that fund managers are opting to take a long-term view when developing bitcoin ETFs.

“It’s important to take a long-term view, rather than looking at price volatility day to day, weekly, month to month, look at the trend over the last 12 years, which is exactly what the investment providers are doing,” Rose explained.

However, he noted that retail investors might be more sensitive to market shifts. This is especially relevant as – looking at the short term – the Federal Reserves’ decision to maintain rates has sparked speculation that retail investors are flocking to scale back their exposure to fixed-supply assets.

“This is a global asset class, [investors] do have to be high on announcements made by central banks around the world and the policies that they may adopt, which impact their local interest rates, and that in turn, impact investor appetite for different assets,” Rose observed.

Meanwhile, acknowledging that such volatility comes with the territory, Oliver noted that fluctuating inflows and outflows week-on-week might be a natural consequence of increased participation from a wider variety of investors.

“A lot of money will go into ETFs and will probably see big inflows and outflows. So it could have the effect of a broader participation in asset class over time, but it also results in more volatility as it brings in investors who potentially wouldn’t have otherwise bothered with the asset class.”

Oliver cautioned against reading too much into limited data but admitted that the picture bitcoin has painted in recent months is, overall, one of “struggle”.

“Bitcoin has been trending around now for the last three months, it broke out to a high back in March, and it has been struggling since,” he said.

“The theory was that [bitcoin] would break higher, helped along by the halving. But so far, that hasn’t occurred,” Oliver said.

“Given all the talk around it, with the ETFs, some may be disappointed that it hasn’t pushed on harder.”