Realized Loss vs. Unrealized Loss in the Cryptocurrency Market: The Impact of Volatility and Hodling Strategies
In the cryptocurrency market, a loss is only realized when a trader executes the sale of their tokens during a period of depreciation. The volatility inherent to this sector frequently results in abrupt declines followed by significant recoveries. A classic example is the historical trajectory of Bitcoin (BTC): in December 2017, it reached US$20,000 before plummeting to below US$4,000 in 2018. However, those who retained their assets witnessed new all-time highs in 2021, when BTC exceeded US$69,000. Even after a severe correction in 2022, dropping to under US$16,000, the cryptocurrency rebounded in 2023 and 2024, approaching historical records once again. This cycle demonstrates that while selling at a loss crystallizes the loss, maintaining assets during downturns can lead to long-term appreciation, aligning with the hodling strategy and the fundamental principle of patience in investment.