What Does HODL Mean? An Overview of the Top Crypto Trading Strategy

Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage Hexn you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. HODL means holding on to an investment position no matter how volatile the price action gets.

The utility of HODLing, like any investment strategy, has its limits. Even a long-term cryptocurrency investor would be well-served to articulate clear goals and to monitor the emerging space for systemic risks. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. There is no difference between HODLing a cryptocurrency and a buy-and-hold strategy. You can HODL a stock through its volatility because you believe in the company’s future success.

Crypto hodl vs. trading

If you simply bought bitcoin ten years ago and held it until today, you would have made incredible returns. So the reason people HODL crypto is simple; it seems to pay to be a hodler. Back in 2013, someone with the username GameKyuubi made a post on the BitcoinTalk forum. After a few whiskeys, they misspelled “I AM HOLDING” and wrote “I AM HODLING” instead. Other users found his spelling mistake hilarious and they became ‘hodlers’ too.

• While some HODLers store their virtual currencies on centralized crypto exchanges (platforms for buying and selling cryptocurrency), many prefer to move their assets to self-custodial hardware wallets.
• While it looks like an acronym – one of those terms like FBI or KFC that abbreviates a word into its initials – HODL is simply a misspelling of the word hold, albeit one that caught on for the silliness of its mistake.
• “Alternative assets,” as the term is used at Public, are equity securities that have been issued pursuant to Regulation A of the Securities Act of 1933 (as amended) (“Regulation A”).

Luckily, many believe that Bitcoin is still in its infancy and you may still be early if you start investing now. In that case, buying and holding means you’ll ride it all the way to a complete loss. Regardless of what you buy, you’ll need to analyze whether it makes sense to use a buy-and-hold strategy.

Understanding HODL: An Overview of the Top Crypto Trading Strategy

They’re holding for the long-term and looking to build life-changing wealth. You only sell in a bear market if you are a good day trader or an illusioned noob. In a zero-sum game such as this, traders can only take your money if you sell. Bitcoin has only been around since 2009, giving it a limited long-term track record compared with stocks, bonds, real estate and other assets. Others have argued that the stubbornness and close-mindedness of HODL culture is “cult-like,” blinding the community to any legitimate criticisms of Bitcoin as an investment or a currency. There’s no question the HODL strategy has paid off well for GameKyuubi and other Bitcoin investors that have held onto their crypto investments.

• Avoiding the urge to give in to fear, uncertainty, and doubt (FUD) is one of the hardest barriers to overcome.
• At the same time, Bitcoiners use HODL as a form of encouragement during crypto winters, literally reminding each other to HODL onto their bags.
• Hopefully, by going through this article, you have familiarized yourself with some of the more common unique terminologies used within the blockchain space.
• The answer to the birth of this concept is the extreme volatility that exists in the cryptocurrency market.
• Examples of cryptocurrencies include Bitcoin, Ethereum, Ripple, etc.

Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Cryptocurrencies continue to gain more attention as an investment opportunity due to the remarkable breakouts in 2017 and 2020. The trend of financial decentralization and currency digitalization provides room for growth to cryptocurrencies.

Is HODLing a good strategy?

But investors who were spooked into selling their BTC in past downturns have lived to regret those decisions. Crypto pump and dump is an investment scheme in which instigators buy large positions in low-cap (market capitalization) coins or tokens before shilling these assets to other investors. The intention is to create an artificial price increase leading to a substantial profit.

• The author admitted to being a ‘bad trader’ and decided to hold onto his Bitcoin investment regardless of the bear market, thus becoming one of the earliest Bitcoin investors to promote this strategy.
• He is also a staff writer at Benzinga, where he has reported on breaking financial market news and analyst commentary related to popular stocks since 2014.
• 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.
• Dozens of high-profile blockchains now use a Proof-of-Stake (PoS) consensus mechanism to validate transactions.

The HODL strategy has since its origin been used as a community anthem used whenever the price of a digital asset has been rallying. The idea is to discourage selling at the top, which could possibly trigger a reversal of the asset’s price. Some say you should HODL until your coin is worth a sum that you’re happy with and then sell and take the profits. However, there’s always a chance that prices may continue to rise after you’ve sold and you may end up regretting your decision to not wait longer.

Where did the term “HODL” come from?

While it looks like an acronym – one of those terms like FBI or KFC that abbreviates a word into its initials – HODL is simply a misspelling of the word hold, albeit one that caught on for the silliness of its mistake. Bankrate follows a strict
editorial policy, so you can trust that our content is honest and accurate. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. At Bankrate we strive to help you make smarter financial decisions.

• This form of ledger technology is what’s behind cryptocurrencies and other tech trends.
• There are also times when it may be prudent to sell, such as cashing out some gains when you’ve met your goals.
• The crypto market is known for being very volatile, which can be a big problem and cause huge losses to cryptoasset investors.
• “HODLers” buy assets and keep them with the expectation that years down the road, they’ll be worth significantly more than they are today.
• In a perfect world, you’ll never invest in any of these cash-burning crypto projects.
• The first step for a beginner in the blockchain ecosystem is to find out where all the important conversations happen, including social media platforms and chat forums.

But these phrases have extended beyond crypto to other assets, such as stocks. During the run-up in the stocks of GameStop and AMC in 2021, individual traders rallied around the phrases, egging each other on to continue to hold or even buy more on the dips. The exact origin of HODL is well established, and the context surrounding it offers a good lesson to cryptocurrency traders and those who would like to get started trading crypto. Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first.

What if I don’t ever want to see this again?

It is a rallying cry by the blockchain community encouraging the weak hands to hold on to their positions whenever the price rises to stratospheric heights or starts plummeting down to earth. Lamborghini supercars have, for a long time, been used as status symbols by wealthy crypto investors, especially those that can attribute a bulk of their wealth to blockchain-related activities. For instance, if the asset is in the middle of a bear market, there will be fewer buyers than there are sellers. For big investors, a falling market might not offer the right conditions to sell. They have to wait for buyers to come in to absorb their large orders.

What does HODL mean in Crypto?

While it’s still unclear if HODLing will pay off for crypto investments, it’s historically been a go to approach for stock traders who want to invest in a bear market. The goal of HODLing is to wait out recessions and other dips in the market, with the goal of cashing out when the market improves. Many long-term HODLers take the examples of successful gains as a validation of a strategy that at times can border on zealotry. In online forums devoted to cryptocurrency, users can be shunned for liquidating part of their holdings even after significant long-term gains. HODL is a term derived from a misspelling of “hold,” in the context of buying and holding Bitcoin and other cryptocurrencies.

Crypto Traders: To HODL Or Not To HODL?

You can also participate in staking rewards with many cryptos, allowing you to generate income while you continue to hold the digital asset and potentially ride it to new heights. However, it’s worth noting that being named ‘HODL’ doesn’t necessarily make it a valuable or safe investment. Like with any other cryptocurrency, the decision to buy and hold HODL tokens should come after careful research. Yes, there is a cryptocurrency called HODL (Hodl Hodl) with an eponymous ticker (HODL). At its core lies the idea of rewarding holders for not selling their tokens, thus providing an incentive for the ‘HODL’ strategy. It’s a fun nod to the term and its origins in the crypto ecosystem.

Cons of HODLing

Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The fall was possibly a result of a ban of third-party payment companies from working with Bitcoin exchanges from China’s central bank (People’s Bank of China). The author loaded the post with typos and upper cases to express his firmness in his simple holding strategy. This Article does not offer the purchase or sale of any financial instruments or related services.

Can you HODL stocks?

There are HODL memes, HODL forums, and even HODL T-shirts, but the term is more than a punchline. In fact, it’s synonymous with a popular—and powerful—passive investment approach. Oftentimes, other investors will suggest HODLing as a solution to FUD. If you’re looking for ways to shape your investing strategy, Public Premium features can help.

Register On Phemex Now To Begin Trading

Therefore, traders interested in crypto need to carefully understand what they’re investing in with crypto. The legendary volatility of cryptocurrency is due to the fact that it’s driven entirely by sentiment, since no hard assets or cash flow back cryptocurrencies (with the exception of stablecoins). Many crypto coins, maybe even most of the 10,000 or so in existence, may end up worthless. 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. Therefore, many investors view any time as a good time to HODL as long as it aligns with their personal investment strategies and risk tolerance.

HODL

As the project rises in popularity and utility, the value of the project’s token also rises. Continue reading to learn more about how it came to be, why it is considered an investment strategy, and other words that you may want to be acquainted with if you wish to be a part of the community. The first step for a beginner in the blockchain ecosystem is to find out where all the important conversations happen, including social media platforms and chat forums. Next, you should learn the terminology, and part of that is identifying the unique terms and phrases used by members of the community, what they mean and how to use them effectively. If a “whale” sells a lot of their stake, it can cause the price of a cryptocurrency to dip by flooding supply, he explains.

Definition and Examples of HODL

With cryptocurrency, Morrison says, the importance of patience is even higher. The volatility is more extreme, but the long-term gains have been quite appealing. A marketplace for cryptocurrencies where users can buy and sell coins.

Due to their highly volatile nature, cryptocurrencies provide great opportunities for traders to build up long and short positions frequently. However, “hodling” can provide more safety to investors, as investors are not exposed to short-term volatility and can avoid the risk of buying high but selling low. This typo quickly caught on within the forum and then spread across the wider crypto community. Since then, it has been adopted by crypto traders and investors as an acronym for ‘Hold On for Dear Life,’ representing a steadfast approach to holding cryptocurrencies amidst market fluctuations. If you’re curious about making HODL a part of your portfolio, we can help you get started. DYdX’s exchange offers dozens of advanced trading features for crypto traders, including fee-free perpetuals.