28 July 2021
Robert G Allen quotes, “How many millionaires you know who have become wealthy by investing in savings accounts? I rest my case.” This question answers our speculation on Investment, but there are so many investment approaches in the market. Cryptocurrency is one such approach that started from just one, which has now reached 5000 Cryptocurrencies!
The first Cryptocurrency - Bitcoin was introduced in 2009. In July 2010, the trading value of BTC was valued at $0.008, climbing to $55,733.30 at present. It is followed by other top cryptocurrencies like Ethereum, Litecoin, Cardano, and many more. Yes, it is a volatile and risky market, but everything that you invest in is only “risky”. This is when researching, studying, strategizing, planning, and risk management come into the picture. There are many strategies to deal with Cryptocurrency; however, you should keep in mind the Golden Investment Rule - “Invest what you can afford to lose.”
One such strategy is HODL - Hold on for dear life, which is derived from the misspelled word “Hold”. The strategy refers to buying and holding an investment in the context of Cryptocurrencies. The term was introduced in 2013 by GameKyuubi through a Bitcointalk forum’s post “I AM HODLING”. To which he admitted later that it was a typo error since he was tipsy on whiskey and briefly mused with the spelling of whisk(e)y. This whole shenanigan went viral that led “HODL” to be a byword or a slang term in expressing an approach to Cryptocurrency strategies. Ever since HODL has been defined with various meanings by the Crypto community; however, the source remains this story from 2013.
In this blog, we are going to discuss All You Need To Know About HODL:
What is HODL?
HODL is a Cryptocurrency Investment Strategy that consists of buying and holding Crypto, hoping for the price to rise in the future. It is the determination to hold the coins even when the market is plunging, and thus it is treated as a long-term investment market move.
The HODL strategy can be emotionally stressful for the investors, but many crypto enthusiasts use this strategy and not give in to FOMO or FUD. They believe in the potential of the Crypto market, and someday cryptocurrencies will replace fiat.
Also Read, Investing In Cryptocurrency This 2021
The HODLers Job
An investor who uses the HODL strategy is called a HODLer. This strategy is for Crypto investors who do not fully partake in the fast-paced Crypto market.
- HODLing helps to avoid short-term volatility and the risks associated with buying high and selling low.
- The HODLers do not give in the despair of FOMO or FUD and are loyal to the HODL strategy. They are not swayed away by the price volatility, news, memes, or any content. Furthermore, they believe that someday cryptocurrencies will replace fiat and would be able to form a global economic foundation.
- Any investment strategy needs planning, execution, and timing, especially it can be overwhelming with Cryptocurrency since the market is volatile. Many platforms provide price predictions based on Crypto price chart analysis, yet it cannot be qualified as a technical strategy and analysis due to the inconsistencies.
- Truth be told, crypto trading is purely based on speculations and hoping for the market to work. Thus as an investor, you need to keep a watchful eye, be updated with the crypto-related news and events, and exit when you feel that you have reached the time or price you had expected to take.
- A cryptocurrency portfolio will help you to balance the HODL and your overall strategy. You should also avoid the mistake of buying high and panic selling.
- You should not HODL everything; since the market is volatile, it is ideal for holding a portion and selling the other portion. It enables you to maintain stability and hedge your investments, and reduces the risk of losing everything.
- You can also learn from various Crypto professionals or experienced Crypto investors to understand the Crypto market influence. With crypto investments, you need to work on what you feel is the best for you, whether to sell or HODL, and mitigate the risk.
Also Read, 6 Benefits A Hodler Enjoys
Common Mistakes to Avoid
- A common mistake that HODLers make is HODL too much for too long, for instance, Bitcoin price has been an extreme rollercoaster from 2011 to 2013, its price surge 52,000 percent and then dropped by over 80 percent in the following year. And since, it has spiked 17 times from its previous high and dropped half again!
- The other mistake that HODLers make is holding a coin that does nothing (have no purpose), a coin that is not in the competition and seems stale. In such situations, you should sell it when you have the chance. Many cryptos values increase since they are on a major exchange, so when a coin drops from a major exchange, you should sell it too, as many other investors will follow the same suit; otherwise, you will just end up with a dead Cryptocurrency.
- One should even consider Cryptocurrency selling when the Government of the Cryptocurrency home country is going to ban it. If the Government bans crypto-related activities such as mining and trading, and if that’s your coin’s country of origin for mining and trading, it is ideal to sell the Cryptocurrency or at least a large part of it.
Thus it is crucial to have a goal and to stick to it when it reaches your expectations, instead of being a little too greedy and losing.
Pros and Cons of HODL
- HODL is said to be a perfect entry strategy for the new Crypto investors.
- It is a profitable strategy when applied and executed properly.
- It is comparatively much easier than the extensive strategies like day trading that needs constant attention to detail and time.
- You can even invest with a small amount and allow it to grow over time.
- HODL helps you to avoid market volatility as you do not have to worry about short-term price movements.
- HODL is ideal during situations when the investor is not confident about Crypto trading.
- What if you expect the price to rise and you keep expecting and it never does?
- With HODL, it does not allow the HODLers to take complete advantage of the Cryptocurrency’s volatility, if executed correctly, other trading strategies have the opportunities to yield profits during volatility, including a spike in the price.
- Investment in Cryptocurrency itself is risky; thus, one needs to have proper planning, strategy, and risk management.
- Cryptocurrency is not regulated, so it is often used for fraudulent and malicious activities such as money laundering.
We believe it fits the best to conclude with the post by GameKyuubi - “You only sell in a bear market if you are a good day trader or an illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.”
Disclaimer: The author’s views and opinions are for informational purposes only and do not constitute financial, investment, or other advice.