I AM ‘HODLING’.
Originally the term HODL came from a Bitcointalk post entitled ‘I AM HODLING’. It was posted back in 2013 when Bitcoin was just $551 and crashing. Naturally the other forum users fixated on the misspelling of the title, and HOLD became an instant classic meme.
His post, a drunken rant from forum user ‘GameKyubi’ was a complaint that he hadn’t taken advantage of Bitcoin’s volatility. He admittedly does not know what he’s doing as a trader, and his plan is to simply hold his BTC as an investment long term. This, it turns out was a pretty good idea if you go back to 2013. Provided he stuck to this simple plan.
Since then HODL has evolved into almost an entire art form of its own, involving complicated mathematical predictions, technical analysis, and even soothsaying at times.
To HODL or not to HODL?
The question of “when to HODL” is as poetic and imbued with meaning for digital asset holders as Hamlet’s iconic line. At its heart, the meaning of the term HODL is a synonym of its original – holding – waiting for the right time for the price of an asset to rise, expressing patience and watching or maybe better yet, ignoring the market.
The crypto market is unique. Its volatility is one of its most significant attributes, an enormous advantage for experienced traders, as well as its greatest shortcoming. Prices can swing by dozens of percent overnight, ruining traders or elevating them from rags to riches in hours. It can change under the sway of influential participants’ statements, news, tweets from Elon Musk, announcements, and other all kinds of other factors. Instability in long-term price dynamics leads crypto owners to adopt either highly aggressive or highly conservative approaches.
There are a number of successful investment and trading strategies but they all come down to the simple premise: Buy low and sell high. HODL can either be a goal from the very start. Ala Warren Buffet – never sell, just buy and keep buying, and when the price goes down, that’s the time to buy even more. Or more realistically, when a trader is trying to time the peak of a bull run, but they miss it and seeing the price start to head in the other direction, they have a choice: sell quickly knowing that just moments ago the prices was much higher, or hold on a wait for the rebound to new all time highs.
For example, if you missed the peak back in 2017, and it seems like most people did, don’t feel too bad. You’re lucky if you were there at all obviously. Unless you sold it all. It all happened really quickly, and when prices are skyrocketing to the moon, nobody wants to take profits too early. In fact a lot of people were just getting in when the price went from over $20,000 USD in Dec all they way down to around 10K in January. And it stayed around that price for a few years. This is what’s somewhat affectionately called “The crypto winter” by the people who held digital assets through the bear market.
HODL is a strategy as well, considering that trading involves a great deal of stress. Trading is also highly based on personal emotions and intuition, which nudge traders to act on spontaneous hunches. That can end up in poor results for the traders.
Having sufficient patience and restraint to hold onto assets while watching their prices crash and burn is a virtue that few can exhibit. In the face of panic and cries of doom, for some it’s nearly impossible. For true investors believing in a return of prices to previous, or even higher values, after the crash is an essential quality.
Hold On for Dear Life
Some people call HODL an acronym for Hold On for Dear Life. As in “trust your past self and hold on for dear life.” Don’t give into fear, uncertainty, and doubt, and sell. Stick to your plan. In some cases this is because the market has dropped and you can’t bear the idea of selling at a loss.
In bitcoin and other cryptos, the value of most crypto assets goes up dramatically after a bear market. Crypto goes in cycles. Bear market, building up to Bull run , and then a huge spike and then crashing suddenly right back down to bear again.
A sudden crash is often spurred by a temporary negative, which could be a regulation, a ban, or other factor. But the crypto market is highly resilient at this point, and that sooner or later a positive factor will lead to a reversal and spur demand. The “crypto winter” of 2017 came to an end with the advent of DeFi in the summer of 2020. If you HODL, and avoid FOMO, you will inevitably win.
Holding assets only makes sense only if the you believes in their long-term prospects. Such a mindset helps avoid disappointment and fosters hope in ensuing price hikes. This is extremely useful in warding off panic, fear, uncertainty, and doubt (FUD) and the bad decisions that follow.
Cryptocurrencies have proven to be the best performing asset class in financial history, raking in thousands of percent ROI. That means market participants are willing to HODL and wait out the periodic storms. For instance, a trader missed their chance to exit an asset’s bull run or take profits, as was the case with bitcoin’s recent $65,000 rally. Then, a good hold investment strategy is simply to hold on for a while and wait for the price to rebound. After all, there are predictions of $100,000 per coin.
Emotions like panic and greed are the landmines that we traders often step on. As the price starts rising, many start believing that it will either keep rising, or that it has reached its apex, and panic. We can start either holding or selling in a frenzy. Both approaches are quite radical. Instead, the golden mean has to be identified by you based on market signals. One must never be forced to sell at a lower or losing position, but rather exhibit flexibility and be guided solely by the essence of trading – making profits.
Do not rely upon soothsayers like Elon Musk, Bloomberg or even Vitalik Buetrin’s posts on social media. They often don’t have your best interests at heart.
You gotta know when to Hodl. Know when to Fodl.
Know when to walk away, know when to run…–Kenny Rogers (sort of)
You’ve gotta HODL when if you believe in your assets. Especially when the negative external factors are paper thin – like someone’s Twitter posts. Such paper-thin factors cannot dramatically undermine a strong asset that has technology backing it up like Ethereum or Bitcoin. Pay attention to large, institutional investors. They are usually a pretty good indicator of an asset’s long term value, because they often have inside information.
Historically, a Bitcoin bull run lasts around 518 days. Obviously the past does not predict the future with any certainty, but keeping a close eye on technical analysis indicators is important. When you see the right signals or the price you have pre-determined is right for taking some profits, do not miss the opportunity to sell high. If you don’t – be prepared to go into hibernation and wait for the next cycle.
The historically cyclical nature of Bitcoin’s price chart indicates that after every bull run, the price doubles before having bottoming out at around half of its last maximum value. Then it starts to climb again. That’s the time to buy or buy back and HODL.
When Not to HODL
Selling right at the very top of a bull run is next to impossible. Traders are always looking for the next high and thus miss the most opportune moment to sell. Therefore, sensing, or defining, (soothsaying) the best moment to sell beforehand is vital.
Having an exit strategy is key. Do not let fear, uncertainty, and doubt cause you to panic or react with emotion as tempting as it will be in the moment.
The “Weak Hands” meme is just as much in play in HODL. It relates to traders and investors who lack conviction in their strategies or lack the resources to carry them out. Stick to your strategy, as you have already chosen it as the best approach. Do not, not give in to panic and jump from one investment strategy to another in the rush of the moment, that will only lead to losses.
You must never put yourself in the position of being forced to sell when the value of an asset is low, since that negates everything you want. Support yourself before you buy, and hold on for dear life.
How to HODL
There is no special skill required other than having the personal restraint against the urge to sell. Exhibiting patience, and wait for the price to climb. Compared to trading, it does not require non-stop monitoring of technical indicators or nervous buying and selling at the best price. It just requires patience, and you’ll make money in the long term.
When evaluating whether an asset is worth hodling, you must consider the time in the market and the timing of the market. Assets that have been around for a while already have the technical buildup, liquidity and expertise in their favor and are unlikely to drop to zero in value or vanish. That is why hodlers have to monitor the market itself and watch the price dynamics. They can then determine when to HODL in anticipation of a price hike and when to sell.
An essential element of hodling is the security of the assets. A hodler must never keep their assets on a cryptocurrency exchange wallet, because most exchanges hold the users’ coins on their behalf, thus restricting privacy and security. This is not the same as owning them yourself – defeating some of the purpose of using cryptocurrency. Instead, cold storage is best, considering the slew of hacks that have bereft many traders of their assets.
Note: Another interesting set of approaches available to hodlers that has emerged recently is staking, liquidity mining and yield mining. Instead of keeping assets hodlers can place them in pools and earn interest. All until the time is right to withdraw them and sell at the best possible price.
There are some drawbacks in terms of private ownership and custody, like giving up ownership and access. But if you want to earn some money on your investment, instead of just waiting, you may have to give up the privacy benefits of owning Crypto.
If you want to do both, keep privacy and earn money, check out Celsius or learn how to stake the ledger.
Cryptocurrency and Blockchain Technology are Not Going Anywhere but Upwards.
It’s doesn’t take much imagination to see how Bitcoin and other cryptocurrencies will continue to increase in value over the coming years. The reasons reside in the growing inflation of fiat currencies, combined with the potential of investing in new and disruptive technologies that are forming a parallel digital economy. In addition, the impending arrival of Web 3.0 will unfold the full potential of decentralized technologies and make cryptocurrencies the standard means of payment. The gradual adoption of digital assets by institutional investors and corporations is also pushing states to develop their own digital currencies – Central Bank Decentralized Currencies (CBDCs).
Cryptocurrency Will Only Become More Valuable.
- Countries dollars are only inflating faster given the global economic downturn
- Web 3.0 is fully decentralized and offers more opportunities for application developers while being largely reliant on cryptos
- Adoption of digital assets by large institutions is already underway, including PayPal, Tesla, banks, investment funds and other
- Central bank digital currencies (CBDCs) are on the way and are going to be used on par with crypto in many Web 3.0 services
Summary
HODL is a misspelling of HOLD in one of the first Bitcoin forum posts.
HODL can be a an effective investment strategy but it depends on patience and planning. Decide when to be buyer, and when to take profits.
Keep your crypto somewhere safe.
You don’t necessarily want to be stuck HODLing through a long bear market, so think about buying in during that time. Taking some profits during the peaks will give you some equity to buy back in again at lower prices. Then HODL and/or accumukate in anticipation of the next bull run.
Ignore fear, uncertainty, and doubt.
Sell high. Buy back low and build up your positions again.
Repeat.