HODL is an intentional misspelling of the word “hold” that originated on a cryptocurrency forum in 2013. Overtime, “HODLing” became a widespread investment strategy used by people worldwide. HODLing has also become a popular mantra among crypto enthusiasts, and has developed an entire internet culture behind it. HODLing refers to the practice of buying cryptocurrency and holding it for long periods of time, and not selling it regardless of short term market fluctuations.
While holding an investment over the long term is an investment strategy far older than 2013, the idea has gained momentum particularly in the crypto community. The idea is that while the short term crypto market is notoriously volatile, cryptocurrencies overall increase their value over time as more people, institutions and countries adopt them for everyday use. HODLing can be a good strategy for investors who believe in the long term potential of a coin and are comfortable ignoring the risks and volatility in the short term.
One key advantage of HODLing is the relinquishing of emotions. Crypto investing can be an emotional rollercoaster, as short term fluctuations can be significant. By holding on to a coin over the long term, HODLers can effectively ride the wave, instead of actively trying to guess upswings and downturns.
Because HODLing is a long term investment strategy, HODLing is one way to minimize capital gains taxes. HODLers can also avoid high trading fees associated with frequent buying and selling.
Long-term growth potential: HODLing is a long term investment strategy. Investors can take advantage of the long term potential of a coin buy holding onto their investments until more widespread adoption of that coin or its underlying technology has occurred.
Emotional stability: HODLing allows the investor to avoid the emotional rollercoaster associated with investing.
Tax benefits: Because HODLing is a long term investment strategy, capital gains and other taxes and fees can be minimized.
Risk of market fluctuations: Like any investment, there is no guarantee that any particular coin’s value will increase over time. Sometimes short term investing is the better strategy, and that is why investing is such a complex activity.
Lack of control: HODLing is passive, not active. Investors have no control over the direction the market takes, and this can be a disadvantage to those who prefer the control of buying low and selling high.
Lack of diversification: By HODLing a single coin for a long period of time, you may be missing out on other potential opportunities — that is unless you are HODLing many coins.
It is essential to keep an eye on the news and watch for market developments in the crypto space, and these can have a significant impact on the value of any particular crypto coin. For example, the Chinese government’s decision to crack down on crypto trading caused rapid market fluctuations. No investment strategy can compensate for a lack of consideration of current events.
HODLing is a popular investment strategy in the cryptocurrency market, and has its place among the family of investment strategies. Whether you are investing in the forex market, gold, stocks or crypto, it is important not to rely on any singular investment strategy. HODLing is one branch of a tree of strategies that may help you succeed in the crypto market.
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