What Is HODL Strategy?

UTC by John Caroline · 6 min read
What Is HODL Strategy?
Photo: Depositphotos

You might think you know a lot about the crypto space but yet some terms still get you confused considering how weird they sound. HODL could be one of them. Learn about the meaning of HODL and all it entails in this guide.

HODL is undoubtedly a word of no meaning and significance to the outside world. However, it is one of the most used terms with a valid meaning in the world of cryptocurrency. The term describes an act of retaining in one’s possession, the amount of coin acquired or purchased. In other words, HODL is a strategy that can be useful if you want how to properly employ it.

A vivid assessment of the meaning would suggest that HODL has the same meaning as HOLD when considering the literal meaning of the latter. HODL is used to refer to HOLD when it comes to crypto-related activities. Hence, HODL is HOLD and HOLD is HODL, but this comparison only makes sense in the crypto circle.

Furthermore, the term is usually used to inform or urge crypto owners and investors to not impulsively sell their assets when the price of a cryptocurrency drops massively and unexpectedly or rises to become highly profitable to sell.

Understanding HODL

HODL is sometimes used as an acronym for Hold On (For) Dear Life. Basically, it just means hold, don’t buy more for now, and don’t sell what you have. This has been adopted as a long-term strategy to hold diverse coins.

On the other hand, HODL is most often used as an action word in crypto communities or crypto social media groups. In this regard, HODL refers to the act of retaining owned crypto assets that have been in one’s custody for a particular period, regardless of the volatility of the market.

As mentioned earlier, the term only has relevance and meaning in the crypto world, where prices are prone to high volatility and are super flaky as they are vulnerable to change at any point. Nonetheless, the term and its diverse meaning are very much applicable to traditional stocks and shares as well and most commonly, any digital currency.

It is most relevant and commonly used when cryptocurrencies or tokens are the subjects of the matter.

Origin of HODL Strategy

The literal process of HODLING has been a long-time strategy of buying and retaining assets in the world of finance. In other words, HODLING has long been a method of investment that is concerned with buying a financial asset and holding it for an indefinite period of time.

The origin of HODL came from an incident of a misspelled HOLD in a crypto inclined statement. The word popped into the air and got exclusive attention in 2013 via a post made to an online crypto group dubbed bitcointalk forum. At that time, the coin had dipped significantly due to a certain action of the Chinese government.

The dump saw the coin falling from $716 to $438 within 24 hours. After that, an intoxicated member called GameKyuubi, in a bid to express his will to continue holding, wrote: “I AM HODLING,” he didn’t want to give up on holding the coin due to certain lessons he had learned from previous fluctuations, and considered himself a bad trader. He made further statements containing more spelling errors as he was partially under the influence of alcohol.

His statement reads:

“I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e.” He continued stating his reasons saying, “WHY AM I HOLDING? I’LL TELL YOU WHY- It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro.”

He considered this the best strategy for poor traders noting that “you only sell in a bear market if you are a good day trader or an illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.”

A few minutes after the conversation was held, the word HODL became a subject of memes and the HODL meme began to find its way exclusively all over the Internet and has become more consistent in the crypto sphere to date.

Why Hodl?

Like many within the crypto space believe, cryptocurrencies are most profitable to people who hold coins on a long-term basis. This point is proven by the fact that the value of a single Bitcoin (BTC) has skyrocketed from under a dollar when it was first launched more than a decade ago to five-digit figures in recent years. Hence, this suggests that it is more profitable to hold crypto assets for a long time before selling off.

HODLING has become a good idea for investors as it is believed that the values of cryptocurrencies are better when people buy and keep retaining their tokens for an extended period.

How to Hodl?

Deducing from the meaning of HODL, the term portrays a concept of simplicity. This is because the idea behind HODL suggests that enthusiasts should acquire as many tokens as they can afford to keep on a long-term basis and continue hodling.

Hence, to carry out the hodl strategy is simple. It only requires investors to buy crypto assets and not sell them off. This means it is a buy-and-hold strategy.

Pros & Cons of HODL Strategy

The HODL strategy has proven to be beneficial in certain ways and also it comes with certain disadvantages at the same time.

Firstly, the concept of buying and hodling cryptocurrencies saves investors from the risks that come with a sudden fall in the prices of cryptos. Investors who have determined to hold their coin for a long period of time would rarely sell off their coin at loss. This is because cryptocurrencies often surge to a significant high after a long time. In this case, they can easily take profit as the fluctuations that might happen at the time they are ready to sell would have a very less impact on their profit.

More so, since hodling requires enthusiasts to hold and not sell, the process becomes stress-free for them as they do not need to keep their eyes on the market and keep tracking prices at intervals. The strategy introduces a concept of peace while investing.

On the other hand, the hodling strategy requires large and sufficient capital, hence it would be a challenging process for investors with low funds. If investors must hodl coins for a long time and enjoy the benefit that comes with it, they must possess a sufficient capital capacity in order to avoid them from being compelled to sell their assets or meet unexpected liquidity needs.

Conclusion

As stated in the guide, the term HODL could sound hilarious when compared to the literal meaning. However, it is beyond a thing of fun to the crypto space. It has become a strategy for investment and has exclusively worked for many.

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FAQ

What is HODL?

HODL is a word used to refer to the act of retaining owned crypto assets that have been in one’s custody for a particular period, not regarding the volatility of the market. It is also an acronym for Hold On (For) Dear Life, which means hold, don’t buy more for now, and don’t sell what you have.

How does the HODL strategy work?

The HODL strategy requires enthusiasts to acquire as many tokens as they can afford to keep on a long-term basis and continue hodling.

How did HODL appear?

HODL appeared through an incident of a misspelled HOLD in a crypto inclined statement.

How to use HODL strategy?

To use the HODL strategy is simply to buy and not sell.

What are the advantages of HODL?

Firstly, it gives investors hedge over the volatile market. Secondly, it saves investors from the stress of keeping track of the market prices.

What are the risks associated with HODL?

The hodling strategy requires large and sufficient capital, hence investors who do not have sufficient capital capacity will be compelled to sell their assets or meet unexpected liquidity needs.

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