What is HODL?
In the distant past of 2013, a user called GameKyuubi typed out a drunken post onto a Bitcoin forum entitled, “I AM HODLING”. It was a typo-filled rant, bolstered up against the age-old strategy of buying and holding, that soon became one of the biggest memes in the cryptocurrency realm. Today, day traders and casual crypto investors throw this term around on the daily, often confounding new users trying to get into the game.
So, what is HODLing, and what does a drunken post from cryptocurrency’s past have anything to do with it? Keep reading to find out.
To HODL means to “hold on for dear life”, usually in the face of a cryptocurrency or Bitcoin price drop during a bear market. It’s the crypto analog of the time-old strategy of “buy and hold”, which seasoned stock traders have been using for decades. But unlike the investment strategies of yore, HODLers are stricter about holding despite Bitcoin volatility.
Generally speaking, HODLers are in it for the long game. They hold their cryptocurrency wallet, believing that it’ll one day rival conventional currencies. Many long-term HODLers believe in the idea of Bitcoin and its potential for revolutionizing the way people pay for things. This is in direct conflict with the increasingly popular short-term mindset that motivates traders to buy and sell quickly.
All of this aside, the term HODL is now used outside of cryptocurrency circles, with recent financial anomalies like the great GME and AMC HODL permeating into mainstream news.
The Origin Of HODL
As we mentioned earlier, the origins of HODL are pretty humorous. In the post titled “I AM HODLING”, user GameKyuubi details how he considers himself a “bad trader” and how only “an illusioned noob” or seasoned day trader would participate in the selling of Bitcoin during a bear market.
Today, this is both a meme and reminder of cryptocurrency’s price volatility and how emotionally charged decisions can make or break a fortune. After all, cryptocurrency is even more unpredictable than regular stocks, with value plummeting to the depths and rising to the highest highs all within the same day.
Why Should I HODL?
Parking your money in a Bitcoin purchase or cryptocurrency might feel like a “waste” to some people. However, long-term Bitcoin holders have inarguably done well for themselves – a person who bought Bitcoin in 2009 and held it until the $60,000 high could be a millionaire today.
However, even if that was a one-off situation, there are still many reasons to HODL today. Here are some of them:
- Beating price volatility: People panic sell stocks or cryptocurrencies when the value plummets to get the most out of their investment. However, this may not always be the best choice. Every market downturn eventually sees a recovery, which means investors who wait may see more gains in the long-term by HODLing.
- Less time investment: While some people may think day trading just means checking your stocks once or twice a week, the truth is that it’s a full-time job. From researching the currency to staying plugged in on the latest news, it can feel overwhelming. But if you park your money, you’ll be able to leave it and do other things.
- Less emotional toil: The buying and selling of Bitcoin and other cryptocurrencies can be a painful experience, especially when you stake thousands of dollars on its growth. But if the daily micro-adjustments of crypto don’t sway you, you’ll be less stressed out overall.
The Risks Of HODLing
HODLing isn’t the end-all strategy for guaranteed returns, and it comes with some of its own risks. Here are a few of the main ones you’ll need to consider before trying this strategy:
- Inherent risks: While buying and holding is generally considered a safe move in investment circles, crypto is much more volatile than traditional stocks. As a result, you can still risk wiping out your capital while HODLing. We recommend only investing money you’re willing to lose.
- Uncertain future: Bitcoin and cryptocurrencies are still in their infancy stages, which means there’s no surefire way to predict what will happen. For example, as regulation on Bitcoin and other cryptocurrencies develop, some folks may find themselves without an avenue for liquidation if blockchain tech is banned in their country.
What Should I HODL?
The tried and tested strategy of HODL is a good one, but it doesn’t tell you what to hold. Unfortunately, there’s no way someone can prescribe where you should park your money – that’s where due diligence comes in. Research is the key to unlocking many investment opportunities, and every person needs to make decisions based on their risk appetite.
But no matter what you choose, it’s essential to diversify your portfolio. Don’t dump everything into a coin you plan to HODL. Instead, pick a few traditional stocks or other currencies to trade.
Final Thoughts On HODLing
HODLing is a wonderful strategy for people who either don’t want to invest too much time into trading or simply want to ride out a bear market. However, it also comes with its own fair share of risks.
Either way, getting educated and understanding markets is the key to making wise financial decisions – and learning about trading and crypto concepts is an excellent first step.
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