Today we will talk about what HODL is, where the word came from, and why it became a crypto-meme, as well as what are the pros and cons of this strategy.
History of HODL
HODL is a cryptocurrency meme, the essence of which is something like this: “keep the coin to the last”, “keep it like your life depends on it”. HODL is also called the most patient strategy. And it usually pays off. There are many cases when investors earned not just “apartments-cars”, but whole fortunes on HODL cryptocurrencies.
If we talk about the origin of the word HODL is a typo from the English Hold. The typo is attributed to a BitcoinTalk forum user named GameKyuubi, who wrote a post in 2013 whining about his “failure to respond quickly to market changes.” This user owns the words “I am hodling”.
On that day, Bitcoin fell in price by 25%. In this connection, GameKyuubi drank a little and decided to complain to the rest of the forum users. Since then, the strategy has received a characteristic name – HODL. And those who do not react to fluctuations in the exchange rate and continue to hold the coin began to be considered hodlers.
THE WINKLEVOSS BROTHERS
Billionaire twins famous for their lawsuits with Zuckerberg. In April 2013, they owned about $11 million worth of bitcoin. Back then, the coin cost “only” $120. Elementary arithmetic shows that since then the assets of the twins have increased 366 times. If they hodled all their coins, now each of them has a fortune of more than 2 billion dollars. The brothers themselves stubbornly refuse to comment on their relationship with the crypto.
Cryptocurrency investor, owner of blockchain startup Bloq. From 2020 to 2021, his capital in crypto gave X4 – from 300 million dollars to 1.4 billion.
And here is an example closer to the people. In 2009, Norwegian student Christopher Koch bought 5,000 bitcoins for a total of $27. Technically, at that time, the price of a bitcoin was $0: mining was just in its infancy, and there were no cryptocurrency exchanges as such. Having sold only ⅕ of his savings in 2013, the newly minted millionaire was able to buy luxury real estate in Oslo. After that, an episode called The Bitcoin Entanglment appeared in The Big Bang Theory. Sheldon dreams that the price of Bitcoin rises to $5,000. Perhaps it was the case of the Norwegian that inspired the writers of the series to create it.
These are just a few cases. You can also remember the CEO of Microstrategy Michael Saylor, who constantly buys Bitcoin and hodl it. Moreover, he buys both as an individual and for a company. Microstrategy owns about 125 thousand bitcoins, and Michael himself owns about 17 thousand coins. And he has no plans to sell them yet.
If we take very ordinary cases, then among your friends there are probably those who threw $50 into a coin and “forgot” about it. For example, if you made yourself a gift for the new year 2018 for this amount and bought BNB on January 1, 2018, and “remembered” it exactly 4 years later, you would get x95. It is unlikely that you could buy an apartment in Oslo, but it would be enough for a car for sure.
Pros of HODL
You can see that HODL is not only a cryptocurrency meme, but also quite a working strategy that has its pros and cons. Let’s start with the benefits:
- Save time and nerves. It makes no sense to follow daily quotes, as ordinary traders and speculators do. In the long run, the price of one day does not matter. It’s best if you log out of your account altogether, “forget” about your investment, and remember it in a few years. From time to time, for the sake of fun, you can read chats with couch experts who, with the next “bloody snot”, shout that this is definitely the end of bitcoin. All that is required of you is not to lose access. Remember the guy who wrote down the password for the $240 million account and lost it? He is far from the only one. According to Chainalysis, there are more than $140 billion worth of bitcoin in lost access wallets today.
- You don’t need to know the technical part. How the blockchain works, what smart contracts are, how China’s policy affects the mining of cryptocurrencies, and so on – you don’t really need all this. It is also not necessary to know the laws of trading. In the long run, you will definitely earn. The main thing is not to invest in scam. If you are completely new, then it is better to just buy Bitcoin.
- Avoid commissions. In the case of a hodle, you only pay it twice: when you buy and when you sell.
Cons of HODL
But, like everything in this world, HODL has its drawbacks:
- Depreciation risk. This mainly applies to Alts. Therefore, if you want to invest in something other than Bitcoin and Ethereum, study the coin well before buying. According to Coinopsy, there are over 2,000 dead coins in existence today. Many of them turned out to be fraudulent.
- Missed opportunities. If you do not follow the situation on the market, you may miss the opportunity to earn here and now. But no one said that you can’t use multiple strategies. You can hodl something at the same time and do something else at the same time.
- Long game. Sometimes for a very long time. The Whales recommend walking for five or even ten years. Although this is the whole point of hodl. Not every investor has the patience to hold on for years.
How and when to buy
If you do not bother at all, then it is worth buying at any time. It doesn’t matter if it’s bullish or bearish. In the perspective you are aiming for, these exchange rate fluctuations will not play a special role. In 5-10 years, you will somehow get a good profit. And here are some hacks.
- Do not react to information noise. Alexander Gerchik, a well-known domestic trader, once said: “Averaging killed more Jews than Hitler in concentration camps.” He knew what he was talking about: if you decide to hodle, then hodle to the end.
- Invest as much as you don’t mind losing. Experts give different figures: some say about 10% of free funds, others even call 1%. The main thing is that in the event of a depreciation of the coin, it does not turn out that it was your last money.
- MVP has saved me more than once. Invest a small amount. For example, on the Binance exchange, the minimum deposit is about $15. Start with it and watch your feelings: how many times a day do you rush to quotes? Over time, you will do this less and less.
- Don’t put all your eggs in one basket. Examine different coins. Bitcoin, of course, is the dad, but it’s not the only interesting coin. Read the news of the crypto market to find out which coins can be promising.
I like this strategy and stick to it. Often I keep most of all cryptocurrency coins for a long time. I sell only when I need money for personal needs. In most cases, I build up my cryptocurrency portfolio. I publish all my purchases on my telegram channel. I advise you to join him and stay up to date with the latest news of my blog.
Disclaimer: This article is not investment advice. Assess the risks yourself before making any investment decisions.