What is HODL?

10 Best Volatility 75 Index Forex Brokers in South Africa

Introduction

The phrase “HODL” is frequently employed within the Bitcoin investing community. There’s an intriguing backstory to this typo of “hold.” The phrase also made its way into other cryptocurrency circles. It is regarded as an investment technique in addition to being a well-known phrase. What was once a joke is now advice that traditional financial planners and cryptocurrency fans share.

Basically HODL is a crypto slang term meaning to buy-and-hold indefinitely. In other words, it implies not selling when markets go down or become volatile. Sometimes it is said to mean “hold on for dear life”.

 

What is HODL?

A post on the Bitcoin Forum, a forum where investors may discuss Bitcoin and the economics, gave rise to the term “HODL.”

It all started in 2013 which is the year seen as a big year for Bitcoin. The price increased from $15 in January to more than $1,100 at the start of December, yielding a 7,230% return. The price experienced a 39% decline from $716 to $438 in mid-December due to its excessive volatility.

In response to the price plunge, a forum member with the handle “GameKyuubi” wrote a post with a title called “I AM HODLING” on December 18, 2013. “HODLING” is a misspelling of “HOLDING.” GameKyuubi concluded that the best course was to hold, since “You only sell in a bear market if you are a good day trader or an illusioned noob.

The word “HODL,” immediately became popular in the forum and extended to other cryptocurrencies. Today, the phrase is used by cryptocurrency investors to describe purchasing assets and holding them for a longer period of time as opposed to trading often.

HODL has come to mean “hold on for dear life”. Crypto HODLers, like buy-and-hold stock investors, pride themselves on “holding on” by not selling their cryptocurrency, no matter what happens in the crypto markets.

 

HODLing as a Strategy

HODL, as an acronym for “hold on for dear life,” has become a mantra among crypto enthusiasts denoting a long-term approach to cryptocurrency investing. As a strategy, HODLing has its pros and cons. The strategy is simple, time-saving, and attracts low costs. HODLing has been proven to work in the crypto arena.

HODLing is the practise of purchasing bitcoin and holding it for an extended period of time. If you want to do it correctly, you should avoid selling your cryptocurrency while prices are down and avoid taking profits when it is rising.

It’s basically the opposite approach of day traders who want to short-term maximise their cryptocurrency winnings. Traders constantly buy and sell their cryptocurrency. When opportunities present themselves, HODLers only purchase more.

HODLing is more to bitcoin maximalists than just a tactic to control emotions that erode profits, such as FOMO (Fear of Missing Out) and FUD (Fear, Uncertainty, and Doubt). Because they think cryptocurrencies will eventually replace fiat currencies issued by governments as the foundation of all economic structures, long-term cryptocurrency HODLers continue to invest in the market. If that happens, cryptocurrency owners would no longer be affected by the fluctuations in the value of cryptocurrencies relative to fiat money.

These guidelines suggest that the optimal moment to HODL is right now, every time, and forever. A real believer would never give up on their tokens, even in the event of a market meltdown or significant volatility. Regarding the future potential of block chain technology, cryptocurrencies, and the communities that have sprung up around them, HODLing has evolved into an ideology.

 

Crypto HODL vs. Trading

HODLers may take a long time to see gains, which can tie up funds for future possibilities. In their brief history, cryptocurrencies have endured dramatic crashes that can take time to recover from. HODLing during market crashes can cause huge losses.

Active people acquire and sell assets based on market conditions. Volatility in cryptocurrencies offers active traders many lucrative chances. Investors have freedom with active trading. That is, they can acquire crypto assets during uptrends and sell them during bad markets.

Active trading lets investors manage gains and losses. They can book or lock in profits if the market matches their estimate or minimise their downside otherwise. However, opening many trade positions may make active trading more expensive. Active trading may not be suitable for beginners without technical and fundamental analysis skills.

Only long-lived digital currencies that appreciate over time can be HODLed. Ideally, you’ll never invest in these money-losing crypto businesses. You should sell cryptos before they burn up your money. Crypto HODLing isn’t golden. Combining it with rigorous study into your cryptocurrencies’ quality and long-term prospects is a smart cryptocurrency investing technique. Most people will fare better with a well-researched HODLing portfolio than day trading.

 

HODL and cryptocurrency

For some, cryptocurrency represents a vision of economic change that is bigger than themselves. One of the distinguishing features of so-called block chain technologies such as cryptocurrencies is that they could theoretically be used to create “decentralized” products and services free from the costs and controls imposed by authorities such as bankers and regulators.

 

HODL and Stocks

Although buy-and-hold investment is commonly linked with cryptocurrency investors, HODLing is not exclusive to this type of investing. Even though stock prices are nearly always less volatile than the prices of crypto assets, many stock investors “HODL” their investments for extended periods of time. Compared to cryptocurrency, buying and holding stocks can provide long-term price appreciation and significantly less price volatility for investors.

Stocks are popular financial assets and purchasing stocks and holding them for an extended period of time is also known as HODLing.

There are three approaches to long-term stock investing:

  • First, there is growth investing, which concentrates on purchasing stocks of businesses with long-term growth prospects. Growth stocks include, for instance, Apple, Netflix, and Facebook.
  • Value investment is the second. Value stocks are those owned by businesses that the market has discounted in relation to their underlying financial performance. Value stocks are purchased by investors with the expectation that the market will eventually uncover their value.
  • And lastly, dividend investment. Purchasing dividend stocks allows investors to have a virtually certain stream of income on a regular basis throughout time. It has been demonstrated that long-term stock ownership can yield profits without the need to actively time stock tops and bottoms. Historically, stocks have continued to rise over extended periods of time.

What is the HODL Coin?

The cryptocurrency HODL ($HODL) was given its name since “HODL” is a widely used expression in the cryptocurrency world. Owners of HODL tokens can receive incentives in the form of Binance Coins, and the token functions via the Binance Smart Chain.

A DeFI token on the Binance Smart Chain (BSC) may also be referred to as HODL. In May 2021, HODL Coin (SHODL) was introduced. Similar to the phrase itself, HODL encourages users to save their tokens in order to receive incentives in the form of three-day-distributed Binance coins (BNB). Taxes gathered on user transactions—like the buying, selling, or transferring of HODL tokens—are what fund the rewards. The tax amount is transformed into BNB tokens, and from the pool of shared liquidity, a portion of the profits are returned to the users.

 

Advantages and disadvantages of HODL

HODLing has a lot of similarities to the Motley Fool’s long-term buy-and-hold stock market approach. In general, we advise holding equities for a minimum of five years. Over an extended period of time, compound returns’ wealth-building advantages become more significant. The same rationale ought to apply to premium cryptocurrencies as well.

The disadvantage is that not all cryptocurrency tickers are made to last. The number of long-term winners among the thousands of cryptocurrencies that are currently available on the market is far lower. While some cryptocurrencies are jokes, some are scams that promise big money, and still others have the best of intentions but have subpar technological designs.

 

Is HODL for you?

It’s not necessary to be an expert in cryptocurrencies to gain knowledge from HODLers. You may be less inclined to lose your cool in the face of market turbulence if you have faith in the worth of your investments.

When you purchase something, it’s a good idea to have a clear understanding of the investment you’re making. One important item to consider when you’re considering selling it is if your analysis has changed in any way.

That does not imply that investing is risk-free indefinitely. Since block chain technology and cryptocurrencies are still in their infancy, it’s possible that they won’t prove to be the game-changing advancement that their proponents hope for. Additionally, there are situations in which selling could be wise, such as cashed in gains after reaching your objectives.

However, HODLing can be a useful default.

Pros and Cons of HODL

PROS

Perfect entry strategy for new investors

HODLing is a simple strategy

Not time consuming

Can participate in the cryptocurrency market without much effort

You can dollar cost average bitcoin

Reduces stress

CONS

Does not maximize profit

HODLing of coins creates barriers

Coins are not used as a means of payment

Less profitable than active trading

You can lose your funds

Can take a long time to be profitable

Conclusion

The term “HODL” refers to the buy-and-hold approach that cryptocurrency investors take and is a misspelling of the word “hold.” The acronym for “Hold On for Dear Life” is HODL. By using the “HODLing” technique, investors can profit from long-term value appreciation rather than suffering losses due to the short-term volatility of cryptocurrencies.

Theoretically, “HODLing” is less hazardous than trading, but investors still have to consider the possibility of shifting public opinion and regulatory changes.

Within the cryptocurrency community, it describes a tactic of sticking onto bitcoin assets despite its numerous price swings and volatility. A buy-and-hold investment approach is comparable to the HODLing technique, which is typically employed by Bitcoin maximalists.

“HODL” can also relate to the HODL token that is available on Binance’s Smart Chain cryptocurrency exchange. If users place their tokens in a liquidity pool, they can receive incentives in Binance Coin.