HODL Overview, History, Benefits and Risks of HODLING

People who HODL crypto must believe their preferred coins will gain widespread adoption (or at least have a net increase in value) while remaining calm amidst significant price swings. The cornerstone of HODL’s appeal is its simplicity—novice investors can understand how to HODL within a few minutes. While big-league investors have the knowledge and resources to capitalize on small price changes and volatility, amateurs are unlikely to predict trends and act on them in time to profit (or minimize losses). When HODLing, buyers research and purchase assets they’re confident in, then hold on to them. JSI and Jiko Bank are not affiliated with Public Holdings, Inc. (“Public”) or any of its subsidiaries.

• By holding stocks for the long term, investors can weather short-term market instability.
• The HODL community encourages other investors not to cash out of their crypto when prices rise and not to throw in the towel when crypto prices fall.
• Please see Open to the Public Investing’s Fee Schedule to learn more.
• The above content provided and paid for by Public and is for general informational purposes only.

Crypto is still relatively new, so we can’t look back over time and see how the HODL strategy has performed. Although buy-and-hold may be an effective approach when it https://hexn.io/ comes to investing in stocks, we still don’t know if it works for digital assets. It’s important to consider cryptocurrency volatility in your investment decisions.

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The cryptocurrency world is full of exciting and interesting eccentricities, including the lingo. Hopefully, by going through this article, you have familiarized yourself with some of the more common unique terminologies used within the blockchain space. The term ‘flippening’ is used within the crypto circles to refer to a hypothetical moment in which the market capitalization of Ethereum surpasses that of Bitcoin. The latter is the oldest and largest cryptocurrency by network value and Ethereum’s market cap has trailed Bitcoin’s for several years. In crypto, the comparable strategy to value investment would be ‘HODLing,’ which works the same way. An investor identifies a project with great potential and invests in it for the medium to long term.

HODLing is an easier and more rational method to take when investing in blockchain projects. Value investors such as Warren Buffett use this strategy when investing whereby they identify undervalued companies, buy the stocks cheap and hold them for several years. The idea is that the value of the stocks would have risen considerably within this period. Others say HODL until your coin becomes a fully spendable currency and you won’t need to worry about having to sell it back anymore. The risk here is that not all coins are created equal, and no one can guarantee the future of any crypto and its ability to become a full-fledged currency. This is especially true with all the new Central Bank Digital Currencies (CBDC) that many governments around the world are developing.

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When looking for what coins to invest in to HODL, traders and investors can first look at the specific cryptocurrency’s historical chart. Now that you’ve heard some of the arguments for and against the HODL strategy in cryptocurrency trading, you might be wondering whether it’s really worth it. After all, we know that cryptocurrency doesn’t have the same proven track record that the stock market has. The strategy of buying and holding an asset for a long period of time is hardly a new one, and its roots predate the invention of cryptocurrency. HODL is a term used in the cryptocurrency world to describe a buy-and-hold investing strategy. The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice.

• Keep in mind that other fees such as regulatory fees, Premium subscription fees, commissions on trades during extended trading hours, wire transfer fees, and paper statement fees may apply to your brokerage account.
• But investors who were spooked into selling their BTC in past downturns have lived to regret those decisions.
• A marketplace for cryptocurrencies where users can buy and sell coins.

Given how volatile swings are when it comes to cryptocoins, the need to make a decision on HODLING occurs more frequently than with traditional stocks. This is because HODLING is a middle ground where you’re assuming things will work out, instead of putting more money into assets, or selling assets when part of you thinks they could be worth much more tomorrow. Despite the recent high rate of return and the reasons to invest, as mentioned above, prudent investors should also reckon with the risks of holding cryptocurrencies.

What Is the Difference Between HODL and a Buy-and-Hold Strategy?

HODL has since become a strategy used by people who admit they do not have the skills to do short-term trades – such as scalping, day trading, or swing trading. The term HODL has also inspired the creation of a similar term often, BUIDL, which is commonly used by the cryptocurrency community to refer to the many kinds of applications that are being built within the blockchain industry. Even though the word started out as a meme, it has become widely accepted in investing jargon as a word for holding cryptocurrencies with so-called diamond hands, a refusal to sell no matter what happens to prices. Cryptocurrencies are considered to be highly volatile assets, and it’s not unusual to see daily price changes of 20+% in either direction.

• Even though traders don’t often sell their positions at the absolute peak (because they cannot predict it), HODLing over time generally will give you positive returns.
• Investments in T-bills involve a variety of risks, including credit risk, interest rate risk, and liquidity risk.
• Digital currency is notoriously volatile, and those who try to time the price swings may find themselves buying high and selling low — gradually or quickly eating away at their capital.
• This is important as it can help spur adoption of crypto as a payment method.
• Cryptocurrencies continue to gain more attention as an investment opportunity due to the remarkable breakouts in 2017 and 2020.

The main difference is that HODLing often involves the support of a community on a crypto forum, which encourages investors to wait out rough periods in the market. The buy-and-hold strategy, on the other hand, has no social component. Today, Bitcoin prices are also down 59% in 2022 as rising interest rates have triggered a sell-off in cryptocurrencies and other risk-on assets.

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It may strike you as a misspelling, and you will be right, but within the blockchain space, that spelling is correct. With all the attention, jargon that was once just used for inside jokes in early cryptocurrency chat rooms and on Reddit threads has now become a part of the dialogue. The offers that appear on this site are from companies that compensate us. But this compensation does not influence the information we publish, or the reviews that you see on this site.

• If you simply bought bitcoin ten years ago and held it until today, you would have made incredible returns.
• Overall, HODL best suits investors with a multi-year vision for their preferred crypto projects.
• If you have a positive outlook on blockchain technology and aren’t afraid of market volatility, HODLing crypto may be worth considering.
• Our estimates are based on past market performance, and past performance is not a guarantee of future performance.

U.S. Treasuries (“T-Bill”) investing services on the Public Platform are offered by Jiko Securities, Inc. (“JSI”), a registered broker-dealer and member of FINRA & SIPC. When you enable T-Bill investing on the Public platform, you open a separate brokerage account with JSI (the “Treasury Account”). SPEDN encourages people to use cryptocurrencies in the real world to buy goods and services, or simply to pay their bills with crypto.

Risks of “HODLING” Cryptocurrencies

HODL, or “Hold On for Dear Life,” is now a widely known concept in the crypto community that refers to the strategy of not selling your digital assets, even amid extreme price changes in the market. And given Bitcoin’s latest bout of volatility, HODL remains relevant a decade later in 2023. It is used in the crypto ecosystem to refer to a strategy of holding onto bitcoin holdings through its various price fluctuations and volatility. The acronym is a misspelling of the word “holding” by a user on an online forum. Typically used by Bitcoin maximalists, a HODLing strategy is similar to the conventional buy-and-hold investing strategy. HODL may also refer to the HODL token on cryptocurrency exchange Binance’s Smart Chain.

Why “HODL” Cryptocurrencies

Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Different countries and parties express different attitudes towards the use of cryptocurrencies. It can significantly hinder their role in supporting international transactions, affecting the value of cryptocurrencies. Unfavorable policy-making and public perspective might drag down the asset value for the long term. Long-term HODLers may use DCA strategies to add to their position, especially during bear markets.

What Is HODLING?

HODLing might not be the best strategy if the investor is looking for short-term gains. Even though traders don’t often sell their positions at the absolute peak (because they cannot predict it), HODLing over time generally will give you positive returns. Even if you bought in late 2017 at $19,000 and sold in early 2021 at $40,000, you would have had a 110% increase on your investment.

What is hodl in the crypto world and its advantages

For those who invest in cryptocurrency, HODL has become a banner proclaiming their long-term allegiance to digital currency. These terms stand in contrast to “paper hands,” those who are willing to sell when volatility ratchets higher. The best time to HODL a cryptocurrency is often subjective and depends on various factors, including market conditions, particular cryptocurrencies, and individual financial goals.

This material is not intended as a recommendation, offer, or solicitation to purchase or sell securities, open a brokerage account, or engage in any investment strategy. “HODL” originated as a misspelling of “HOLD” (written in all caps), in an online post by an early Bitcoin investor. But “HODL”, as it has gained popularity among crypto enthusiasts, 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. In contrast, other investors choose to time the market, which leads them to make short-term decisions or trades. Compared to buying and holding, market timing needs a lot more skills and expertise, meaning beginners have a disadvantage with this strategy as opposed to value investment.

The HODL token may seem like an attractive source of passive income, but the price of a HODL token is down more than 99% from its all-time high. A 10% tax is applied to each HODL transaction, and the tax is automatically liquified and converted to BNB (BNB). That BNB is then transferred to a reward pool and is distributed every seven days to investors who hold HODL tokens in their wallets. Even billionaire investor Ray Dalio said he was wrong about 66% of the time he personally disagreed with the “buy and sell” decisions of his hedge fund’s automated quantitative investing process. The “Oracle of Omaha” famously encouraged investors never to own a stock for 10 minutes that they wouldn’t be comfortable holding for 10 years.

It refers to a situation when a crypto investor has encountered a massive loss by being on the wrong side of a trade. As we have mentioned before, cryptocurrencies are highly volatile assets, and there is a high chance that a trader can lose their investment quickly. HODLing is an investment strategy derived from the traditional financial world where it is referred to as buy and hold.

Understanding the HODL Strategy

It doesn’t matter which cryptocurrency is in your portfolio, as long as you hold it for a few years (or more) before selling. The misspelled “HODL” quickly circulated among the crypto community, and soon after turned into an internet slang to indicate when a person holds bitcoin rather than selling it. Use of the term was later extended to include other cryptocurrencies.

Where did the term “HODL” come from?

The crypto market crashes that happened in 2018 and 2020 are perfect case studies that support the HODL investing strategy. In December 2017, the price of Bitcoin reached $19,700, but by November 2018 Bitcoin fell to a low of $5,500. Then, from 2018 to middle 2020 the price of Bitcoin (more or less) stayed below $10,000, and rarely broke the $10,000 mark. However, by summer 2020 a bull market began and Bitcoin saw its price go from $10,000 in June to $60,000 by April 2021. It went parabolic, and as a result some day traders made money, but also many people lost out on the action (not the HODLers).