HODL

HODL, which comes from a misspelling of the English word HOLD, is a term commonly used by cryptocurrency investors to mean that they refuse to sell their cryptocurrencies regardless of rising or falling prices. But it is used more frequently during bear markets, when people refuse to sell their coins despite falling prices, to encourage confidence in continuing to hold cryptocurrencies. HODL was later transformed into an acronym for "Hold On for Dear Life," which refers to not selling even in the face of severe market volatility and poor market performance.

Origin of HODL

The term “HODL” originated from a post on the Bitcoin Forum, a platform where investors can share their views on Bitcoin and the economy. On December 18, 2013, a forum member with the username "GameKyuubi" wrote a post titled "I AM HODLING", with "HODLING" being a misspelling of "HOLDING".

2013 was a big year for Bitcoin. The price surged from $15 last January to more than $1,100 in early December, a return of 7,230%. With high volatility, the price fell 39% from $716 to $438 in mid-December.

Bitcoin’s decline may be due to China’s central bank (People’s Bank of China) banning third-party payment companies from working with Bitcoin exchanges. The “I AM HODLING” post was a response to the price collapse. The author peppered the post with typos and capital letters to express his firm stance on the simple hold strategy. The misspelled term "HODL" quickly circulated in forums and spread to other cryptocurrencies. Cryptocurrency investors use the term to refer to buying and holding an asset for the long term, rather than making frequent trades.

It turns out that the author of the post made the right decision. The price of Bitcoin began to surge again in mid-2017, reaching an all-time high of $19,167 by the end of the year. However, the price fell again after surging in 2017; it rose again during the COVID-19 pandemic and hit a new high of over $58,000 in early 2021.

How to Invest with HODL Strategy?

1. Be Prepared for Volatility

Bitcoin is one of the most volatile assets in the world, and altcoins are even more volatile than Bitcoin. Huge volatility is what allows holders to reap huge returns, but it can also work in other ways. For example, in March 2020, BTC fell by 50% in one day. This was an abnormally large drop even for Bitcoin. Bitcoin usually falls by 30% or more in a bear market. Investors should regard the drop as normal. investment part and be prepared for it.

2. Enable a Hardware Wallet

Hardware wallets are the most secure way to hold cryptocurrencies. Before you can send a transaction from your hardware wallet, you need to press a button on your device. Even if a hacker takes control of your computer, he cannot steal your cryptocurrencies from the hardware wallet.

3. Be Prepared for Long-term Investment

According to HODL's definition, to hold cryptocurrencies, you need to stay invested for the long term. Bitcoin typically has a four-year market cycle, and many holders plan to keep their cryptocurrency for several years or longer. For someone new to cryptocurrencies, it might be wise to own 3 to 5 years. While it's very possible to make a lot of money investing in cryptocurrencies, it can take a while to reap big gains. Mutually

4. Don’t Day Trade

The worst thing you can do as a hodler is day trade cryptocurrencies. Anyone can buy and hold cryptocurrencies, and you don’t need to understand charts, technical analysis, or how the options and futures markets work. Unless you have some innate skills and take the time to develop them, it's unlikely that the average person will make more money day trading than they make by hoarding coins.

5. Get Involved in the Community

There are many ways to get involved in the crypto community. Slack threads, Reddit communities, and various interesting forums like BitcoinTalk. Exodus also has a Twitter account with over 40,000 followers. It's much easier to hold cryptocurrencies when you know others are doing the same thing.

Why Use HODL Strategy?

Cryptocurrency is a digital currency powered by blockchain technology. It acts as a medium of exchange and can also be held as an asset or investment. Examples of cryptocurrencies include Bitcoin, Ethereum, Ripple, and others. Decentralization is the main feature and advantage of cryptocurrency as it is not issued by a central authority such as a country’s central bank.

Due to the outbreaks of 2017 and 2020, cryptocurrencies continue to receive more attention as investment opportunities. The trends of financial decentralization and currency digitization provide room for growth of cryptocurrencies. Against the backdrop of post-epidemic low interest rates amid inflation expectations, investors also hold cryptocurrencies as a store of value.

HODL refers to the buy and hold strategy. Buy-and-hold investors tend to hold onto their assets for the long term in order to profit from long-term value appreciation. In contrast, traders trade much more actively, seeking returns by buying low and selling high. Due to its high volatility, cryptocurrencies provide traders with excellent opportunities to frequently enter long and short positions. However, HODL can provide investors with more safety because they are not affected by short-term fluctuations and can avoid the risk of buying high and selling low.

When Should You Use a HODL Strategy?

Deciding when to hold or sell cryptocurrency is a personal choice, and investors should conduct research and due diligence before making these decisions. Some investors choose to go all-in on a HODL strategy, meaning they buy cryptocurrencies to add to their portfolio and don’t plan to sell them for months or years. This is a good move for those who believe in the long-term value of cryptocurrencies, but it's unclear what the outcome will be. The future of the industry remains to be seen: hacks, bad news, and other world events can affect crypto prices.

Some people choose to hold certain coins but actively trade others that they believe have little growth potential. HODL tokens tend to be more mature and stable, although holding a token with a lower market cap may be more profitable if it grows significantly over time. The HODL strategy may be a good option for investors who don't want to spend a lot of time on their cryptocurrency portfolio or who are unfamiliar with technical analysis of crypto investments.

No matter which sector you invest in, it's always wise to build a diversified portfolio so that if one segment declines, others are likely to perform well and help mitigate losses in other areas. There are thousands of different cryptocurrencies available to invest in to build a diversified portfolio. The cryptocurrency market remains very volatile and it is important to do your research, follow the market, and know that anything can happen, even the loss of your entire portfolio.

Advantages of HODL Strategy

Risks Controling

By holding cryptocurrencies, you can control your investment risk by limiting the number of coins you buy and hold in your portfolio. Buying and holding a limited amount of a cryptocurrency reduces the risk of losing your entire investment if a coin's price suddenly drops.

Take Advantage of Market Fluctuations

You can take advantage of market movements to maximize your profits. For example, if the price of a cryptocurrency suddenly increases, you can sell your coins and make a profit. Likewise, if the price of a cryptocurrency drops, you can buy more coins and grow your portfolio.

Long-term Benefits

If the price of a cryptocurrency increases, you can make long-term gains. This is because, by holding coins in your portfolio, you are investing in cryptocurrencies for the long term.

Optimize Investment Portfolio

The holder has full control over his portfolio. This means he can decide when to buy and sell without being bound by the mutual fund's investment schedule or the decisions of the manager.

High Flexibility

This technique provides holders with greater flexibility when investing. For example, if the price of a cryptocurrency increases, investors can decide to sell for a profit, or hold the position for more profits in the future.

Low Commission

With this strategy, the investor only pays commission for the buy and sell transactions he/she makes. This is much cheaper than investing in mutual funds, which often charge high commissions.

Great Earning Potential

As we have already mentioned, cryptocurrencies have high earning potential. This is because their prices can rise or fall significantly in a short period of time, so investors can make substantial profits if they invest wisely.

Risks of HODL Strategy

Large Price Fluctuations

Cryptocurrency prices are very volatile. Investors may have to experience extreme ups and downs in the value of their assets, which means their risk appetite should be much greater than that of investors in traditional investment vehicles. They must have sufficient financial capacity to avoid being forced to sell or to meet unexpected liquidity needs.

Short History and Lack of Supervision

Cryptocurrencies have a relatively short history compared to other types of assets and fiat currencies, so their future faces many unknowns. Policy regarding cryptocurrencies is not yet complete. In the absence of central authority oversight, cryptocurrencies can be used for fraudulent activities such as illegal transactions and money laundering.

Policy Has Great Influence

Different countries and political parties have expressed different attitudes towards the use of cryptocurrencies. It could seriously hinder their role in supporting international transactions, thereby affecting the value of cryptocurrencies. Adverse policymaking and public opinion can drag down asset values over the long term.