HODLING in crypto is an investment strategy. It means holding on to your cryptocurrencies instead of selling them even when the market crashes or becomes volatile. While HODLING, you buy a crypto asset and don’t sell it for a long time, irrespective of market variations.
It prevents one from panic selling their crypto asset too early. Investors use this approach to retain their assets over long periods to capitalize on the asset’s long-term value appreciation.
Even though Hodling is usually associated with cryptocurrency investors, the buy-and-hold strategy is also commonly followed by stock investors. This is different from day traders who have a more active attitude, obtaining profits by buying at lower prices and selling at higher ones.
Day traders rapidly buy and sell assets within the same day, exploiting short-term price fluctuations for profit. It requires in-depth technical expertise, quick decision-making, and continuous monitoring. It also demands substantial time commitment and emotional control.
Conversely, HODLING is a straight long-term strategy in which investors buy cryptos and hold onto them for long periods, even for years. They do not react to short-term market fluctuations.
The Origin of HODLING
What began as a mistake on a Bitcoin forum has become a prominent slang term in the Crypto world. The term HODL came into existence in 2013 when BitcoinTalk forum user GameKyuubi posted “I AM HODLING”, with a typo in the word hold.
He was expressing his frustration with the market crashing, announcing that he is planning to hold on to his crypto assets rather than sell them.
Written in all caps, the misspelled word soon became viral among the crypto community and is now synonymous with the “Buy and hold” strategy in crypto investing.
Some Crypto enthusiasts have adopted the term HODL as an acronym for “hold on for dear life”. The phrase also refers to having “diamond hands”, which means to have a strong hold on the crypto you own, even when there is pressure to sell.
Why do people HODL?
HODLING is generally an excellent strategy to profit in the crypto space. The crypto market is very volatile. The prices can skyrocket or crash anytime which can cause panic selling. HODLing gives investors a sense of security.
They are not exposed to short-term volatility and can avoid the mistake of purchasing high and selling low. The idea is to hold back from selling with the expectation that their assets will increase in value over time with cryptocurrencies gaining momentum among mainstream investors.
This prevents impulsive decisions based on emotional reactions to market fluctuations. It also requires only minimal involvement and monitoring from the investor.
How to HODL?
HODL is simple in theory but requires extreme discipline to practice. Here are some key points to keep in mind to be successful in HODLING:
Pick cryptocurrencies wisely
Conduct in-depth research before investing. Find a cryptocurrency that you believe has long-term potential for value growth. Avoid concentrating all your investments on a single asset.
Ignore market noise
The markets fluctuate frequently, often based on news, speculations, and rumors. Stay focused on your long-term goal and avoid reacting to it. Be mentally prepared to face short-term declines in your investments.
Secure your assets
Store your assets in a secure crypto wallet to avoid thefts and hacks. Make use of a cold wallet instead of using your standard wallet. This reduces thoughts of selling off your crypto if there is a significant crash in your portfolio.
Don’t buy when prices are high and don’t sell when prices are low
If you wish to HODL cryptocurrencies for the long term, don’t buy when prices are high, and take care when you are selling that the price is not at its low point.
Stay informed
Even though you don’t have to closely monitor every market fluctuation, you should stay updated about the fundamentals of your cryptocurrency.
Practice Patience
Investors may have to ride a lot of ups and downs in their asset values. This requires one to exercise extreme patience since it can take months or years to see significant results.
The Bottom Line
Even though a commonly followed long-term strategy, the HODL strategy is not for everyone. It has a factor of uncertainty since we can’t accurately predict future performance and long-term value.
Be aware of your financial situation and risk tolerance before buying crypto. Invest only the amount you can comfortably afford to lose without affecting your financial stability.
Even the most experienced HODLers may be affected by market volatility and experience fear, uncertainty, and doubt (FUD). Understand that HODL is more than just a strategy, it’s a mindset to stay grounded in one’s goals, no matter the obstacles that come their way.
