It’s often said that buying Bitcoin is not a big deal, it’s HODLing the asset for the long term that is the real test. That is because every time Bitcoin’s price swings, any investor would be intrigued to either take some profits or cut their losses.
Many of us have done that in the past only to later realize that the best was yet to come. But that need not be you. If you’re considering growing your assets without having to do anything, HODLing may be your best option.
Let’s dive in to understand what HODLing means and how you can HODL.
Defining HODLing Crypto
HODL, commonly seen as an abbreviation for Hold On for Dear Life, refers to keeping your Bitcoin or other cryptocurrencies rather than selling them whenever the market crashes. It’s the exact opposite of what day traders would do, who try to time the market and maximize their profits through it. Hodling is also seen as a measure against panic selling — the act of trying to jump out of the market in panic whenever a crash occurs.
HODL is quite simply holding onto your crypto and blockchain assets for an extended period of time — regardless of any market swings. It’s become a way of life for many in the crypto community, who see mass adoption as a long game and are in it for the duration: they buy their crypto, secure it and wait patiently.
There are also those who HODL crypto for their strong belief in cryptocurrency fundamentals, seeing it as the eventual replacement of fiat currency.
So with all this in mind, how can hodlers ensure they remain secure as they hunker down and play the long game?
When to HODL Your Crypto?
The best time to HODL crypto is now, always, and forever. A true believer would always hold on to their tokens, even if markets crash or become extremely volatile. HODLing becomes an ideological belief about the long-term prospects of blockchain technology, cryptocurrencies, and the communities that have formed around them.
The Risks of HODLing Crypto
Despite the recent high rate of return, prudent investors should also reckon with the risks of holding cryptocurrencies. The prices of cryptocurrencies are very volatile. Investors may have to experience extreme ups and downs of their asset values, which means they should have much larger risk appetites than investors of conventional investment instruments. They must have sufficient capital capacity to avoid forced sales or meet unexpected liquidity needs.
With a relatively short history compared to other types of assets and fiat currencies, cryptocurrencies face a future with lots of unknowns. The policy over cryptocurrency has not been well-established. Without surveillance from a central authority, cryptocurrencies can be used for fraudulent activities, such as illegal transactions and money laundering.
Different countries and parties express different attitudes towards the use of cryptocurrencies. It can significantly hinder their role in supporting international transactions, affecting the value of cryptocurrencies. Unfavorable policy-making and public perspective might drag down the asset value for the long term.
The Brief History of The Word “HODL”
The actual term, “HODL,” originated from a bitcointalk post by GameKyuubi.
If you’re unfamiliar, Bitcointalk is a forum launched by bitcoin creator Satoshi Nakamoto intended to discuss bitcoin and field questions about the project. It has since been a gathering place for the crypto community, and was the site of many significant developments both culturally and technically for the industry.
On the evening of December 18, 2013, GameKyuubi famously went on a drunken, self-deprecating rant, admitting that he was a bad trader and was going to hold on to his bitcoin rather than attempting to predict its price action.
In his post GameKyuubi is also aware that he misspelled “hold” but was too drunk and/or upset to change it.
Ever since his post, many investors have come out in favor of more conservative approaches to investing, such as dollar cost averaging, as a way to mitigate bitcoin’s short term volatility.
Final Thoughts
Overall, HODLing cryptocurrencies has been a sufficient cryptocurrency strategy used by thousands of people who have prevented themselves from panic-selling after their assets have crashed in value, which ultimately resulted in massive gains.
However, this is not the case with every cryptocurrency asset out there, and some tokens have never truly recovered in value. After all, cryptocurrency investing of any kind is highly risky because it is a highly volatile industry.
It is one of the most straightforward cryptocurrency investment strategies that has stood the test of time and proven relevant over the long term.
