More than 10 years have passed since the introduction of Bitcoin. Over these years, the segmented cyberpunk and crypto movements evolved into the Crypto community. Nowadays, the Crypto community has a prophet – Satoshi Nakamoto – symbols and slang – a specific language generated by crypto supporters.
Words such as mooning, shilling, funding, “pump and dump”, FOMO, and DYOR – the list goes on – are commonly used as crypto enthusiast slang. However, HODL is by far the most common of these terms and the one that almost every crypto trader can relate to.
“Hodl – slang in the crypto community for holding coins rather than selling them.”
HODL is a term used by crypto investors, which means they hold Bitcoin or other digital assets for an extended period of time, focusing on the long-term outlook and regardless of short-term market fluctuations. If you’re wondering if HODL is a rewarding investment strategy that helps you weather the extreme swings in the crypto market, we’ve got you covered. This article will give you an in-depth understanding of what HODL means and answer questions such as “what does HODL mean” and whether you should use it as an alternative to profit from short-term trading.
Let’s get straight to the point!
Key points to remember
- The term HODL was born in 2013 from a typing error.
- It has since become an investment strategy for digital currencies and means holding Bitcoin or other digital assets for an extended period of time, focusing on the long-term outlook and independent of short-term market fluctuations.
- HODLing crypto has proven to be very profitable for long-term gains in popular cryptocurrency tokens such as BTC, ETH, etc.
What is HODL?
HODL was born out of a nearly decade-old typo. On December 18, 2013, a user by the name of “GameKyuubi” posted on the Bitcointalk online forum titled “I HODLING.” In the crypto forum, GameKyuubi described how bad a trader he was and how he planned to “hold” his Bitcoin (BTC) investments. He concluded that the best course was to hold since “You only sell in a bear market if you are a good day trader or a deluded noob. The people in between hold on. In a zero-sum game like this, traders can only take your money if you sell.
This four-letter typo embodies the idea that blockchain and crypto will transform society and unlock enormous resources for people who continue to trust crypto even during difficult times. The term “HODL” now pops up whenever the crypto market empties and sends the message to holders not to sell.
In no time, the HODL meme spread among crypto traders in the crypto markets. The HODL community encourages other investors not to sell their crypto when prices are rising or even when crypto prices are falling during a bear market. As the price of Bitcoin in 2013 was notoriously volatile, Bitcoin investors found the buy and hold strategy rewarding. New investors are most likely to profit from this type of crypto strategy, which gives them plenty of time to explore the crypto industry.
Crypto enthusiasts took what was clearly a misspelling of the word “holding” and described it as an acronym for “hold for life,” referring to the cryptocurrency strategy of not selling your digital assets even in the midst of market volatility. Although this is not how the term originated, this explanation expresses the true investment strategy that HODL represents.
It should also be noted that HODLing works the same way it has traditionally worked for investing in the stock market where the guideline is to store HODL stocks for at least five years to benefit from your investments.
Is HODL a good investment strategy?
Now that we have a good idea of what HODL means, let’s see if it’s the right approach for you. Investing in digital currencies is risky due to their price volatility, and the risk becomes even greater because the crypto market is unregulated. In this sense, HODLing crypto has proven to be very profitable for long-term gains in popular cryptocurrency tokens such as BTC, ETH, DOGE, etc.
However, this is not the case for most cryptos without long-term prospects. No matter how dearly crypto investors might hold onto these tokens, they could still end up becoming worthless, generating a loss for investors who used the HODL strategy.
Additionally, many crypto investors apply the HODL strategy to their transactions because they believe that blockchain technology and blockchain assets will eventually replace fiat currency – and that HODLing their assets will lead to long-term value appreciation.
As you can see, HODLing crypto is not a one-size-fits-all investment strategy, and you need to make an informed decision about which tokens to invest in and whether to HODL the tokens or sell them when the price rises.
When should crypto investors use the HODL strategy?
Whether HODLing is a promising approach for you depends on your experience and goals as an investor. If you are a day trader hoping to take advantage of rapid price swings in short-term trades, then HODLing will mean missing out on opportunities to benefit from short-term price swings in the crypto market.
However, we will suggest HODLing if you want to build long-term wealth, given that you are choosing the right cryptocurrency tokens for long-term investment. Additionally, you can HODL based on belief in the mass adoption of cryptocurrency.
HODLing also has several advantages if you are new to the cryptocurrency market. This will save you from the risks of short-term investment strategies that could make money faster, but at the cost of a steep learning curve. It will also help you make money from your crypto investments while taking your time to gain trading experience.
The downside of HODL is the time it takes to make a profit and the fact that investors miss out on opportunities to profit from short-term price swings in the crypto market.
What is the best crypto investment strategy?
The high volatility in cryptocurrency prices and the recent collapses of LUNA, FTX, etc. make crypto investing a risky business, so which investment strategy is best for cryptocurrency investors to adopt?
The answer is to invest in a diversified portfolio to mitigate risk and reduce losses. Once you’ve built your wallet, you can lend your crypto to a liquidity pool to earn more tokens, earn rewards through staking, and more. HODLing will also give you time to gain the investment experience required for short-term trading. And, in case you decide to just HODL, carefully research the token you’re investing in and make sure it has long-term value.
Crypto acronyms you need to know
Here are some of the acronyms widely used by the crypto community and associated with HODLing:
UDF: Fear, uncertainty and doubt. HODL investing can help investors control the emotions associated with FUD.
FOMO: Fear of running out refers to people entering trades when a crypto price is at its highest. HODL investing can help investors control the emotions associated with FOMO.
Diamond needles: Extreme form of HODLing.
Paper hands: Refers to people without diamond hands.
Final Thoughts
The HODL strategy helps crypto investors escape high volatility in the crypto market and not follow market sentiment.
