Should You HODL Crypto?

The term HODL began as a typographical error for the word “hold” on a bitcointalk.com forum. The crypto community found this so hilarious that they now use "HODL" as a term to imply holding (rather than selling) one's crypto. 

What Does HODL Mean?

"HODL" is a term that is frequently used in the crypto community. Because it is so commonly used, it has become the slang term that most new investors learn first.

HODL refers to an investing strategy in which investors make up their minds to hold on to their coins despite a market downturn. When a price falls, investors are more likely to view the asset negatively. Those that implement the HODL strategy, on the other hand, will continue to keep their coins and not sell them.

HODL Origin

The term HODL originated from a post on bitcointalk.org, a popular bitcoin forum. A user with the name GameKyuubi got a little tipsy on his whiskey and posted a typo-filled message on the forum. 

He explained that he was being called a "bad trader" for not selling during the latest price plunge. Regardless, he continued to "HODL," and despite the humorous relief that the inebriated rant offered, the essence of the message stuck around and continues to do so to this day.

“I AM HODLING,” which began as a drunken typo that was posted on December 18, 2013, has evolved into a key term in the crypto market. Since its original posting, the crypto community has come up with many interpretations of the typo, the most popular of which being “Hold On for Dear Life.” In fact, Quartz dubbed it as an "essential slang term in Bitcoin culture" in 2017.

Should You HODL Cryptocurrencies

These days, there are various trading methods people can employ. HODLing does not require full-time commitment like day trading, and so, it may be the best entry strategy for newbies.

Rather than selling and buying based on short-term price movements, a HODLer just buys and then holds onto the coins in the hope that its price will rise in the future.

HODLing is a trading strategy that demands a lot of emotional strength, even though there are only two steps to it. Between 2011 and 2013, the price of bitcoin increased by 52,000%, before plummeting by 80% the following year. This price volatility is why HODLers experience a considerable degree of emotional stress.

In most cases, two antagonists to the HODL strategy exist: FUD (fear, uncertainty, and doubt) and FOMO (fear of missing out). These two demons frequently cause investors to buy high and sell at low prices, resulting in a lower profit than initially intended.

HODLing means more to hardcore bitcoin believers, sometimes known as Bitcoin Maximalists, than just battling the profit-eroding inner demons. Bitcoin Maximalists believe that cryptocurrencies will eventually replace fiat currencies. Cryptos is more than just making a profit to them, rendering the fiat exchange rate irrelevant.

For more information on whether to HODL or not, click here. 

Risks of “HODLING” Cryptocurrencies

Despite the recent high rate of return and the motivations to invest, prudent investors should also consider the risks of holding cryptos. 

Cryptocurrency prices are extremely volatile. Investors may be subjected to extreme ups and downs in the value of their assets, implying that they must have significantly higher risk appetites than investors of traditional investment instruments. To avoid forced sales or meet unanticipated liquidity needs, they must have sufficient capital capacity.

Cryptocurrencies have a relatively short history compared to other forms of assets and fiat currencies; thus, their future is full of unknowns. The policy over cryptos has not been fully established. They can be used for fraudulent activities such as money laundering and illegal transactions without surveillance from a central authority. 

Different countries and parties have different views on the use of cryptos. Unfavorable public perspective and policy-making may bring down the asset value for the long term. 

You may want to read this article titled: The key to HODL is knowing when to SODL.

Conclusion

Cryptocurrencies present fantastic opportunities for traders to build up short and long positions due to their extremely volatile nature. However, HODLing can give investors more safety, as they are not exposed to short-term volatility. These investors can avoid the risk of buying high and selling low. 

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