The topic of this article is What is The HODL Strategy? We will give you information about this subject.
HODL is undoubtedly a word that has no meaning or significance to the outside world. However, it is one of the most used terms with a valid meaning in the cryptocurrency world. The term describes the act of holding, the amount of cryptocurrency one has acquired or bought. In other words, HODL is a strategy that can be useful if you want to use it properly.
A vivid appraisal of the meaning suggests that HODL has the same meaning as HOLD, given the literal meaning of the latter. HODL is used to refer to HOLD when it comes to crypto-related activities. Therefore, HODL is HOLD and HOLD is HODL, but this comparison only makes sense in the crypto circle.
Also, the term is often used to inform or encourage cryptocurrency holders and investors not to impulsively sell their holdings when the price of a cryptocurrency drops drastically and unexpectedly or becomes too profitable to sell.
HODL is sometimes used as an acronym for Hold On (For) Dear Life. It basically means just wait, buy more for now and sell what you have. This has been adopted as a long-term strategy for holding various cryptocurrencies.
On the other hand, HODL is most commonly used as an action word in crypto communities or crypto social media groups. In this context, HODL refers to the act of holding owned crypto assets that are in one’s custody for a specified period of time, regardless of the volatility of the market.
As mentioned earlier, the term has relevance and meaning only in the crypto world, where prices are super flaky as they are prone to high volatility and are vulnerable to change at any point. However, the term and its miscellaneous meaning can be applied to traditional stocks and most commonly any digital currency.
The Origin of the HODL Strategy
The actual process of HODLING has been a longstanding strategy for buying and holding assets in the financial world. In other words, HODLING has long been an investment method involved in purchasing a financial asset and holding it for an indefinite period.
The origin of HODL came from a misspelled HOLD event in a crypto-prone statement. The word suddenly became popular and gained particular attention in 2013 with a post to an online crypto group called the Bitcointalk forum. At that time, the cryptocurrency dropped significantly due to a specific action from the Chinese government.
Everyone saw the coin drop from $716 to $438 in 24 hours. Later, a drunk member named GameKyuubi wrote “I’M HODLING” to express his desire to keep holding on, and because of some lessons he learned from previous fluctuations, he didn’t want to give up holding money and considered himself a bad trader. He made statements with more typos, partly because he was under the influence of alcohol.
His statement is as follows:
“I wrote this twice because I knew it was wrong the first time. It’s still wrong. We.” He continued, giving his reasons, “WHY AM I WAITING? WE WILL TELL YOU WHY- Because I am a bad trader and I KNOW I am a BAD Trader. Yes, that’s exactly how you good traders can see highs and lows and make sure it’s okay you can make a million bucks bro.”
He rated this as the best strategy for traders with relatively few assets, saying that “you only sell in a bear market if you are a good day trader or a misleading rookie. People in between do. In a zero-sum game like this, the trader can take your money if you just sell.”
Within minutes of the conversation, the word HODL became the subject of memes and the word HODL only began to find its way all over the Internet and has become more consistent in the crypto space to date.
As many in the crypto space believe, cryptocurrencies are most profitable for people who hold crypto in the long run. This point has skyrocketed to five-digits in recent years, from under a dollar when the value of a single Bitcoin (BTC) was launched more than a decade ago. So this suggests that it is more profitable to hold crypto assets for a long time before selling them.
HODLING has become a good idea for investors because it is believed that the value of cryptocurrencies is better when people buy and hold their tokens for a long time.
How Is Hodl Made?
Deriving from the meaning of HODL, the term describes a concept of simplicity. This is because the idea behind HODL suggests that enthusiasts should acquire as many tokens as they can afford to hold and continue hodling for the long term.
Therefore, implementing the hodl strategy is simple. It only requires investors to buy crypto assets and not sell them. This means it’s a buy and hold strategy.
Pros and Cons of HODL Strategy
The HODL strategy has proven beneficial in certain ways and also comes with certain disadvantages.
First, the concept of buying and hodling cryptocurrencies relieves investors of the risks that come with the sudden drop in crypto prices. Investors who decided to hold their cryptocurrencies for a long time rarely sold their cryptocurrencies at a loss. This is because cryptocurrencies often rise to a significant level after a long period of time. In this case, they can easily make a profit as the fluctuations that may occur as soon as they are ready to sell will affect their profits much less.
Moreover, since hodling requires enthusiasts not to sell and hold, the process becomes stress-free for them as they do not need to keep their eyes on the market and monitor prices at regular intervals. The strategy presents a concept of peace when investing.
On the other hand, since the hodling strategy requires large and sufficient capital, it will be a difficult process for low-funded investors. If investors are to hold the coin for a long time and reap the benefits it brings, they must have sufficient capital capacity to avoid having to sell their holdings or meet unexpected liquidity needs.
The term HODL may sound funny when compared to its literal meaning. However, it is beyond anything fun for the crypto space. It has become an investment strategy and has worked for many.
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