What Does HODL Mean?
The word ‘hodl’ looks like a typo — and it actually is. It all started when GameKyuubi, a Bitcoin Forum user, excitedly proclaimed that they were ‘hodling’ the asset (instead of holding it).
The post became rather famous in the Bitcoin community because the user advocated holding Bitcoin when its price was plummeting.
Though it seemed counterintuitive at the time, GameKyuubi appears to have had the right idea. BTC was worth around $450 at the time of posting (December 2013) but climbed close to $20,000 in 2017. Thus, OP got an excellent ROI in under four years, proving that HODLing can be a winning strategy.
What started as a drunken rant proved to be successful in the long term. Thus, HODL gained a new, more formal meaning, “hold on for dear life.”
How to HODL Bitcoin
The HODL trading strategy is pretty simple. After all, the user that gave it its name claimed they were using it precisely because of their lacking trading skills.
In investment terms, holding an asset simply means not selling it, even when you see its price head lower. Some traders panic when they notice one of their investments is losing value and choose to sell it, incurring a loss. They accept defeat because they fear that keeping the asset longer would result in a greater loss down the line. They don’t believe the asset’s price will increase once it has started falling.
Holding is the opposite of that. It shows that an investor is confident that even if an instrument starts losing value, it will recover one day. They see weakness as temporary and refuse to sell the asset at a loss.
Now, let’s take a look at Bitcoin. It reached an all-time high of almost $70K in 2021, but then it suffered a massive price drop. Today we find BTC at around $40K.
In the present scenario, HODLing Bitcoin would mean resisting the pressure to sell. Instead, HODLers are sticking to their investments in the hopes of Bitcoin reaching and surpassing that ATH in the future.
The Pros and Cons of HODLing
Like any other trading strategy, HODL is not perfect. It might not suit every single trading style. Whether it’s a good match for you depends on your trading goals and budget. Thus, you should consider its advantages and disadvantages before deciding whether to use the HODL strategy.
- Requires minimum effort
- Good for long trades
- Potentially high ROI
- Low short-term volatility
- Takes patience
- Not suitable for day trading
- Earnings take a long time to materialise
HODLing Bitcoin or other cryptocurrencies is a simple trading strategy with a great potential for higher profits in the long term. Nevertheless, this approach might not be the right fit for you if you’re looking to make a quick buck or are prone to feelings of fear and doubt in trading. But if you believe that crypto tokens will increase in value and applications to one day replace fiat currencies, HODLing might be the perfect strategy for you.
This article is for information purposes only. Investing in cryptocurrency carries risk, and you risk losing your entire capital.