The hodl cryptocurrency strategy has been utilized by many cryptocurrency investors who do not want to deal with too much information or hassle regarding getting the most out of their assets & tokens.
It is one of the simplest mETHods through which you can invest in cryptocurrencies, and today, we will be going over its meaning, how it all works within the field of cryptocurrencies, and certainly, how to HODL crypto.
HODL Crypto Meaning
HODL is a term commonly used by cryptocurrency investors that refuse to sell their cryptocurrency regardless of the price increasing or decreasing. It is more frequently used during a bear market when people refuse to sell their coins despite the price drop.
HODL was later retrofitted to be an acronym (backronym) for “Hold On for Dear Life” and refers to not selling, even during strong market volatility and poor market performance.
Origin of HODL
HODL was originally a spelling mistake by a user named ‘GameKyuubi’ on BitcoinTalk. In the original BitcoinTalk thread titled “I AM HODLING,” GameKyuubi wrote:
“I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF's out at a lesbian bar, BTC crashing 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.”
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.
How to HODL Crypto?
This means that a trader needs to restrict themselves from selling the cryptocurrency token, even in extremely volatile times in terms of its value.
This strategy can be efficient for investors who might otherwise try to time the market, as HODL can be used when the market is going down as a means of helping investors resist any urge to panic-sell. It can also be an extremely clever and efficient strategy for beginner cryptocurrency investors or investors prone to emotions and regularly making impulsive decisions.
What Would Happen if you HODL Crypto Coins?
WhETHer you should hodl, as a crypto investment strategy or sell cryptocurrencies, those are the decisions every cryptocurrency trader needs to make. Investors need to do their research before making any decisions.
Suppose you are an investor who has decided to HODL your cryptocurrency coins. In that case, you should ride out any potential downfalls in terms of the value of the tokens you own, with the eventual goal of them increasing in value throughout the long term.
For example, between January 2021 to January 2022, there was a fluctuation along the way. Most of the crypto price dropped by 50% in June-July, but you ignored it and focused on other important things in your life. If you bought US$1000 worth of Solana (SOL) cryptocurrency tokens at the end of 2020 and implemented the HODL strategy up to January of 2022, it would have been worth around US$110,000 because the SOL token has grown in value more than 10,000% since then.
Moreover, If you are wise enough and stake the coin that you were holding, you can earn an extra yield.
Reasons to HODL Crypto
There are many reasons why the hodl strategy can be beneficial when dealing with cryptocurrency assets.
1. Long-Term Gain
As we discussed with the SOL token, the token saw an increase of 10,000% throughout a single year. BTC also saw its latest all-time high value in 2021, even after dropping in value tremendously before that point in time. Historically, looking at the top cryptocurrency tokens, long-term gain has been achieved.
Everyone who bought BTC or SOL early on through their development is now reaping tremendous benefits. The interesting aspect here is that many of them will probably remain HODLing the tokens and utilize their future growth.
Long-term gain involves the strategy of HODLing tokens for a year or even more. Some might even suggest HODLing until you absolutely need to withdraw the funds for specific use-cases, which are more important.
2. Generation Wealth Transfer
So if you were to hold cryptocurrencies, your family could become wealthy because the asset you hodl can be transferred to the next generation. This is somETHing many millennials are aware of and are taking advantage of hodling due to this.
According to a CNBC Millionaire Survey, nearly half of the millionaires have at least 25% of their wealth in cryptocurrencies. The results highlight a new generational divide in wealth creation from crypto, where younger investors can earn vast fortunes from the surge within the price of Bitcoin, ETHereum, and other digital currencies.
This means the future generations of your family can utilize your HODL portfolio.
3. HODLing Crypto Against inflation
Cryptocurrencies have been growing in popularity, specifically towards inflation-phobic investors. This is because many investors see cryptocurrencies as a better hedge against inflation when compared to even gold.
HODLing cryptocurrencies could result in the maintenance of the value in a much more stable way when compared to many fiat currency alternatives out there. This is why holding crypto might be a solid option, especially Bitcion, with a very limited supply and known inflation schedule that reduces over time.
In fact, when we look at the data from the financial consultant deVere Group, in a recent survey, we can see that most millennials consider Bitcoin as a much safer investment when compared to gold. By using a sample of over 700 millennial clients from across the globe, 67% responded that the popular cryptocurrency had supplanted the historically valuable metal, gold, in their estimation.
Closing Thoughts
Overall, learning how to HODL crypto has been a sufficient investment strategy used by thousands of people who have prevented themselves from panic-selling after their assets have crashed in value, which ultimately resulted in massive gains.
However, this is not the case with every cryptocurrency asset out there, and some tokens have never truly recovered in value. As always, make sure to do your own research prior to deciding if this is the right strategy for your specific needs. Ultimately, this is an easy strategy through which newcomers can gain a lot of benefits.
