Cryptocurrencies are considered to be highly volatile assets, and it’s not unusual to see daily price changes of 20+% in either direction. Even Bitcoin, now a relatively stable cryptocurrency, still registers 10-20% moves in some days. HODLing campaigns are also witnessed whenever the price of an asset starts falling. In such a situation, any more selling could lead to further price correction and the best action for the long-term investors is to discourage weak hands from letting go and thereby mitigating further losses. HODLing is a cryptocurrency investment strategy not unique to crypto but rather a rehashed term made to appeal to the eccentric crypto community. It’s similar to the buy-and-hold strategies used by many stock market investors.
The project also organized an airdrop for users who sacrificed their tokens in a burn. This initiative aimed to reward loyal holders and encourage long-term investment in the HODL ecosystem. HODL’s community-driven approach and strategic promotions have contributed to its distinct identity within the cryptocurrency space. The project’s alignment with the HODL ethos—encouraging long-term holding despite market fluctuations—resonates with many in the crypto community. HODL strategy helps crypto investors to escape from the crypto market’s high volatility and not move with the market sentiment. Whether HODLing is a promising approach for you depends on your experience and goals as an investor.
HODLING As a Strategy and Guiding Philosophy
The trend of financial decentralization and currency digitalization provides room for growth to cryptocurrencies. Under the post-COVID low-interest context with inflation expectation, investors also hold cryptocurrencies for value reserve. The misspelled term “HODL” circulated quickly in the forum and spread to other cryptocurrencies.
- The HODL investment strategy ultimately comes down to having extreme conviction in an investment and being committed to not selling no matter how bad a drawdown it experiences.
- In a perfect world, you’ll never invest in any of these cash-burning crypto projects.
- This integration with the NFT market adds a layer of utility to the HODL tokens, making them more than just a speculative asset.
- 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 term originated from a 2013 online post to the Bitcointalk forum where the typo appeared. The price of Bitcoin in 2013 was volatile at the time, surging to over $950 at the beginning of December 2013, up from just over $130 in April of the same year. The poster encouraged people not to sell and that they were “hodling” [sic].
When to HODL
Most new investors benefit from a simple buy-and-hold approach while learning the market. HODLing has made early adopters of Bitcoin and Ethereum very wealthy, especially those who held through multiple market cycles. While future gains may be less dramatic, long-term holding can still yield substantial returns if the asset appreciates.
HODL
If you’re a day trader hoping to profit from the rapid price swings in short-term trades, then https://stablecapitalmax.net/ing will mean missing the opportunities to benefit from short-term price fluctuations in the crypto market. However, this isn’t the case for most cryptos with no long-term prospects. No matter how hard crypto investors might hold on for the dear life of these tokens, they might still end up becoming worthless, generating a loss for investors who employed the HODL strategy. Hodling sounds a lot like the long-term buy-and-hold strategy The Motley Fool employs in the stock market. The wealth-building benefits of compound returns make a bigger difference in a longer time frame.
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It functions as a medium of exchange and can also be held as an asset or investment. Decentralization is the major feature and advantage of cryptocurrency, as it is not issued by a central authority such as a country’s central bank. It’s a healthy part of a sensible cryptocurrency investing strategy when combined with serious research into the quality and long-term prospects of your cryptocurrencies. Most of us will do better with a well-researched hodling portfolio than a short-sighted day trading approach. It’s worth noting that ‘market timing’ — the act of trying to predict future price movements — is notoriously difficult and risky, even for seasoned investors. Satoshi Nakamoto, the creator of Bitcoin, designed it as a medium of exchange and a store of value, suggesting a long-term use case.