HODL: The Cryptocurrency Strategy of «Hold on for Dear Life» Explained

Depending on your investment strategy and risk profile, HODLing can be a good approach. However, crypto markets are highly unstable and there is no guarantee that HODLing will be successful. Even if HODLing doesn’t seem right to you, there’s still lessons to be learned from this approach. HODLers are a social bunch—their strategy relies on support from other investors, who urge them along and convince them not to sell if they are feeling unsure.

• People who believe cryptocurrencies like Bitcoin will become mainstream currencies may never sell their portfolios, opting to keep their assets until they can spend them like fiat currency.
• The idea is that the value of the stocks would have risen considerably within this period.
• Moreover, in a normal crypto trading environment, people make money by buying and selling coins as their prices fluctuate.
• If the strategy works out in their favor, their assets should be worth more in a few years, regardless of the initial price they paid.

It’s also commonly come to stand for «hold on for dear life» among crypto investors. In early bitcoin forums, someone posted a message that spelled the word «hold» wrong, and readers interpreted it as an acronym «hold on for dear life,» Saddington explains. «Now, it’s become a meme of sorts, so that when the prices are highly volatile, bitcoin buyers say ‘HODL!'» Saddington describes himself as «a long-term HODLER.» In that case, investors buy when prices are low, hold an asset while the value increases, then try to sell it before the price dips.

Trading vs. HODL: Who Makes The Biggest Profit?

The HODL approach has been rewarding for long-term investors in Bitcoin, Ethereum (ETH) and other leading cryptocurrencies, as it’s helped them navigate extreme fluctuations in the crypto market. In no time, the term HODL spread like wildfire throughout the crypto world. Today, it refers to investors who refuse to sell their crypto regardless of how high or low prices trade. If you invested $1,000 in Bitcoin on the day of the original HODL post, it would be worth much more today. But there are countless people who have lost money trading Bitcoin in the meantime, buying it when it was high and bailing out after a disappointing fall.

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FUD

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• Cryptocurrency has been the best performing asset class of the past decade.
• Investors may have to experience extreme ups and downs of their asset values, which means they should have much larger risk appetites than investors of conventional investment instruments.
• Cryptocurrency is still relatively new and isn’t subject to the same regulation as traditional investing.
• The HODL token operates using the Binance Smart Chain, and HODL token owners can earn Binance Coin rewards.

Crypto forums may preach the benefits of HODLing, but there isn’t definitive proof that it works for crypto investments in the same way it has traditionally worked for the stock market. Crypto investors quickly retrofit HODL as an acronym for “hold on for dear life,” an encouragement to other crypto investors not to sell when prices fall. The term originated from a 2013 online post to the Bitcointalk forum where the typo appeared. The price of Bitcoin in 2013 was volatile at the time, surging to over $950 at the beginning of December, 2013, up from just over $130 in April of the same year. The poster encouraged people not to sell and that they were «hodling» [sic]. HODLing is a sound investment strategy that has been successfully applied even within the traditional markets; however, its efficacy depends on the investor’s goals.

Is HODLing a Good Investment Strategy?

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Under the post-COVID low-interest context with inflation expectation, investors also hold cryptocurrencies for value reserve. The term ‘HODL’ originated from a post in a Bitcoin forum, where the user accidentally typed ‘hodl’ instead of ‘hold’ during a discussion about trading strategies. The user referred to themselves as an ‘illusioned noob’ who was poor at trading, thus choosing to ‘hodl’ during a period of high price volatility. Yes, the principle of HODLing can also be applied to the stock market. It’s similar to the buy-and-hold strategies used by many stock market investors. The idea is to purchase stocks and hold onto them for a long period, regardless of market fluctuations.

HODL or…?

While there is incredible volatility in crypto, investors have earned the best returns of any asset class in the world simply by hodling their coins, as you can see in these bitcoin success stories. Since the original HODL forum was posted in December 2013, Bitcoin prices are up about 2,500%. Even investors who bought on the first day of 2018 and employed a HODL strategy are still up more than 17% on their investment. Cryptocurrency and blockchain technology are still relatively untested, and they may not pan out as the revolutionary innovation their supporters envision. There are also times when it may be prudent to sell, such as cashing out some gains when you’ve met your goals.

• Most of us will do better with a well-researched hodling portfolio than a short-sighted day trading approach.
• But «HODL», as it has gained popularity among crypto enthusiasts, has come to mean «hold on for dear life».
• Despite the uncertainty, HODLing can be a powerful investment technique for those with an optimistic view of the future of crypto.
• HODLers are a social bunch—their strategy relies on support from other investors, who urge them along and convince them not to sell if they are feeling unsure.
• You can HODL a stock through its volatility because you believe in the company’s future success.
• The volatility is more extreme, but the long-term gains have been quite appealing.

As with many other popular memes, the origin of HODL can reportedly be traced back to a typo. Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.

Can You HODL Stocks?

However, the difference between long-term value investing and long-term HODLing is the difficulty in accurately valuing cryptocurrencies. Ben Gagnon, chief mining officer for Bitfarms (BITF), says HODL is more of a mentality than an investing strategy. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.

Why do people in crypto love to HODL their coins?

It’s been an interesting journey, one that’s taught me a lot about the value of patience in investing. As a firm believer in the HODL strategy, I apply it to my own investments. Because it’s a relatively new and rapidly growing market, prices are constantly shifting. To protect your investments, it’s essential to know the ins and outs of your strategy of choice before making a purchase. Overall, HODL best suits investors with a multi-year vision for their preferred crypto projects.

HODL and Bitcoin

When a stock or crypto’s price is at its lowest point, investors typically experience fear, anger and panic that can lead them to sell at the worst possible time. Likewise, when a stock or crypto price is at its highest, investors often feel excited and overconfident, prompting them to buy at the worst possible time. GameKyuubi explained in the post that he planned to “hold” his Bitcoin (BTC) investments because he knew he was a bad trader. You don’t have to be a cryptocurrency disciple to learn something from the HODLers. If you believe in the value of your investments, you might be less likely to panic in the face of market turmoil. HODL may also refer to a DeFI token on the Binance Smart Chain (BSC).

What does HODL mean in Crypto?

HODLing is often seen as a simple and effective strategy, especially for those who prefer to avoid the stress of daily trading. It’s based on the belief that over time, the value of cryptocurrencies will increase despite short-term price swings, a view held by many crypto traders. The term HODL was born from a post titled ‘I AM HODLING,’ made by a member named GameKyuubi, on the famous Bitcoin forum Bitcointalk in December 2013.

That means that you’re missing an opportunity for potential gains in those markets. Jason Porter, senior investment manager at Scottish Heritage SG, says the HODL strategy can be particularly useful for crypto investors during market weakness, such as 2022’s crypto winter. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.

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However, while “HODLing” might be a good strategy, it doesn’t tell you what to own. Buying and holding a poor investment can lead to years of bad returns, if not a total loss on the investment. The term almost immediately became a meme via social media, and the misspelling continues to live on in internet message forums such as the infamous Wall Street Bets board on Reddit. Here’s the origin of HODL and why it can be a valuable investing strategy. Bankrate.com is an independent, advertising-supported publisher and comparison service.

Because HODLing requires a long-term commitment, many investors use cold storage devices, such as hardware wallets, for security. Cold wallets keep a user’s private keys offline so their assets are not easily hacked or stolen. Even high-quality hot wallets are generally more vulnerable to hacks than cold wallets.

It is important to know when the right time is because this metric varies from one individual to another. The right time to sell will largely depend on the goals of investing. If these goals are achieved, the coin holder can sell at any price in the market; otherwise, they continue to HODL. HODLing campaigns are also witnessed whenever the price of an asset starts falling. In such a situation, any more selling could lead to further price correction and the best action for the long-term investors is to discourage weak hands from letting go and thereby mitigating further losses.

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