Hodling is a buy and hold strategy that is most useful in the context of cryptocurrency. HODL is simply a misspelling of the term hold, also a term that is very popular in the world of bitcoin and crypto. So, where did HODL come from?
The Origin of HODL
HODL is an investment strategy that involves buying and holding cryptocurrency, even during a bear market. This strategy was first created in 2013 by an anonymous crypto investor who posted his thoughts on the Bitcoin Talk forum and can be traced back to the misspelling of “hold” in his post. It has since become a popular investing technique among crypto investors due to its low risk-reward ratio. HODLers tend to buy a certain amount of cryptocurrency and hold it for several months or longer, regardless of market conditions. This approach allows investors to reduce their exposure to short-term volatility and protect themselves from any major losses caused by sudden price fluctuations. HODLing is actually considered a form of long-term speculation, as investors expect that the value of the asset they’re holding will go up over time. As such, it often proves to be beneficial for those who are looking for passive returns on their investments versus active trading or taking part in zero sum games. By hodling cryptocurrencies, investors are able to minimize their risks while potentially achieving handsome rewards if the value of their holdings increases over time. Therefore, when it comes to making sound investment decisions regarding crypto assets, hodling is definitely an option worth considering for any serious investor.
Hodling: A Smart Philosophy and Crypto Strategy
Since 2013, HODL has literally become a byword for the approach of investing that avoids trading due to short-term price fluctuations. Short-term fluctuations aside, bitcoin’s volatility truly defies the standard familiar logic. What this means is that the crypto world is highly unpredictable so we can expect crypto can either land on the moon or crash to the ground.
What hodlers do is to ignore all this say and wash their hands of all prognostication and extreme volatility. By hodling, they simply overcome their fear of missing out, doubt, and of course, uncertainty. The fear of missing out is a very destructive tendency that can lead investors to buying high. On the other hand, doubts can cause investors to sell low. If you are a staunch fan of cryptocurrency, hodling is more of a smart strategy for bypassing fear, doubts, and any other profit-eroding obstacles. Maximalists can’t let go hodling because they believe that Bitcoin will eventually replace fiat currencies such as the Euro, the Dollar, and their cousins.
Cryptocurrency analysts now believe that bitcoin hodling levels are at a high level of 60%, a level once witnessed in 2016, a year before the popular $20k bull-run of 2017. According to the analysts, the crypto marketplace is experiencing significant hodling similar to the one experienced in 2016 when one bitcoin would exchange for $20,000 US dollars.
What Does it Take to HODL?
A closer look at the digital marketplace reveals that in this day and age, investors are employing several strategies to take out huge profits from whatever they do. Cryptocurrency is no exception because hodling is just but one of the most common strategies that buyers and sellers are using to maximize their profits, too. Unlike day trading, hodling doesn’t need full-time commitment, which means that it is a perfect strategy for beginners to enter the industry. Instead of buying or selling coins based on price fluctuations, hodlers buy digital assets and let the market run its course, in the hopes that bitcoin prices will rise in the future. Hodling is a trading strategy that requires a lot of emotional strength. You see, the volatility in the world of cryptocurrency is the major reason hodlers are usually emotionally stressed.
Trading Without Too Much Effort
Hodling allows investors to participate in the crypto marketplace without much effort. This is definitely one of the major reasons why investors should invest in this trading strategy. By buying coins for the long term, there is no point to be worried about buying, selling, and transaction fees. It is a passive trading strategy that has worked both for crypto and traditional market investors. As long as you have stored your assets and private keys in a secure wallet, you can wait as long as you wait to sell higher. A performing hodling strategy can see traders get huge returns after buying low and selling higher.
The Dollar Cost Average Bitcoin Strategy
With this strategy, traders have the possibility of adding funds to their crypto wallets without selling them. This way, you can think of it as a smart strategy to protect you from obtaining huge amounts of crypto when prices are high or when low. You can leverage this strategy without injecting a lot of money into it because you can buy small amounts of bitcoin on a daily, weekly, or monthly basis.
As you already know, making profits out of a trading platform can be a bit tricky. Yet, every investor is looking to make a killing and buy a dream car or something like that. Stress accompanies the pressure that comes with the need to get crazy rich from trading in crypto. However, by hodling, investors are able to reduce the stress of trading crypto at all times. Besides, it reduces the time a trader spends staring at BTC charts. Yes, it may easily come across as a stupid advantage but you shouldn’t view it that way. Indeed, if you are spending longer periods of time looking at the charts, there are chances that you may end up making a bad decision. If you create a negative impact on your finances, you know the amount of stress you may be exposing yourself to, right? While it won’t relieve you from stress 100%, it will at least improve your mental performance in other activities.
It is Less Profitable
Active buying and selling is without a doubt the best way to maximize your profits. Holding coins over time means that you are postponing a profit-making opportunity, literally. After all, choosing to hodl may mean that it will take you several years before getting a return on your investment.
You Risk Losing Funds
Losing your private keys is something that can damage your financial life – that’s a fact. Unfortunately, most investors do not even remember where they left their funds, especially after hodling for several years. If you are looking to hodl for a longer period of time, make sure to control your wallet throughout that period.
In this article, we have explored a smart bitcoin strategy that is hodling, its pros and cons. As you have seen, it is an ideal strategy for beginners and most investors, but of course, it is not everyone’s cup of tea. You see, if you want fast profits, then avoid incorporating this philosophy into your trading activities. Nonetheless, hodling is profitable in the long run because you will sell when prices are higher or HODL forever. And don’t forget that hodling is not just for individual investors. Crypto companies and investors also hold onto their coins for the long term in order to create stability and trust within the market. So if you are good trader, consider holding onto your coins for the long run!