What Does HODL Mean?

Sep 10, 2022
07:09
2 min reading

Choise.com team

Table of Contents:

What Is HODLing?
What Is the Strategy HODL?
What are the Benefits and Downsides of HODLing?
When to HODL?
Can You HODL Stocks?

Every time you attempt to type the word HODL, the text auto-checker is likely to fix this seeming typo to HOLD. But HODL is not a spelling mistake. HODL has become a popular buzzword in the crypto space, and it indicates keeping Bitcoin or other cryptocurrencies for as long as possible, ignoring the market volatility.

The first use of the word HODL dates back to 2013 in the “I AM HODLING” publication on the Bitcointalk forum. The author (GameKyuubi) complained of his bad trading skills and shared his intention to continue simply keeping his Bitcoin (which was rapidly falling in price at the time) without trying to predict the next market movement.

According to the author’s opinion, HODLing is the best strategy for poor traders:

“You only sell in a bear market if you are a good day trader or an illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.”

Interestingly, the post was loaded with multiple typos and CAPSLOCK, which the author would later explain the influence of whisky.

“I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e.” “WHY AM I HODLING? I’LL TELL YOU WHY- It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro.”

Some comments following the post suggested that HODL could be decoded as “hold on for dear life.”The funny word went viral and immediately entered the cryptocurrency lingo. Today, HODL commonly refers to an investment method of buying and keeping a coin, taking no heed of the come-and-go market trends.

What Is HODLing?

The newly-invented word quickly gained traction in the crypto community and eventually became a professional term used by crypto investors who choose to buy and never sell cryptocurrency assets, irrespective of current market fluctuations.

Today, HODLing is one of the most used investment strategies in the crypto world where a person purchases some virtual asset and refrains from selling the coin, even if the price plummets.

It is also among the safest approaches to investing in cryptocurrencies. When HODLing, a person is theoretically safe from momentary market hysterics when lots of people buy coins at a high price and sell them much cheaper later, as the coin price never returns to its all-time high.

HODLers (crypto users who choose to HODL) stay invested because they believe that the coin of their choice will become more valuable over time and bring substantial returns on investment one day.

HODLers keep on owning their coins, without paying attention to the over-hyped predictions of sharp price changes, fake news, and other scary content that often takes over the global crypto community. In this context, HODLers are not exposed to FOMO and FUD – the notoriously known profit-destructive trading behaviors:

FOMO (fear of missing out) is a negative feeling that pushes an investor to buy an aggressively touted asset at a high price, believing that its price will continue to grow;
FUD (fear, uncertainty, doubt) – is a desperate reaction to a drastic price fall that pushed an investor to dispose hastily of their assets (panic selling or SODLing).

What Is the Strategy HODL?

In the modern cryptocurrency lingo, the strategy “HODL” describes a situation of purchasing virtual assets and keeping them in the crypto wallet for an extended period.

Under this investment strategy, individuals do not panic when the price of the coin dips but go on holding their tokens, waiting for a more favorable time for selling to come. By doing so, investors expect to capitalize on the increase in the value of their asset in the future.

The HODL strategy is different from a short-term trading approach where investors purchase an asset at a low price, wait for the price to surge, and then sell it before the price sags.

What are the Benefits and Downsides of HODLing?

The HODLing investment strategy has both advantages and disadvantages, and to decide whether this method suits your investment goals, you should consider the both sides of a matter.

HODLing pros

It does not require timing the market. For a short-term trading strategy, it is vital for an investor to be able to feel the market sentiments and guess when the asset price will surge or fall. For inexperienced traders – which most people are – making accurate market predictions is a hard job, but HODLing saves them from the need to do any analysis or research.
Reduced taxes. If you profit from an asset held for less than a year, you will pay a higher capital gains tax opposed to the tax paid earnings from the long-held assets. The HODL strategy will result in lower tax bills.

HODLing cons

Decent initial investment. The HODLing strategy requires a person to have a large and sufficient initial capital which will hypothetically bring great profits over years. For investors with a low budget, building the first investment portfolio for HODLing may be quite a challenge.
The tied up capital. The biggest drawback of HODLing is that the capital stays idle, it does not work, and does not generate passive income – it only waits for the right day to come. An investor gets tied up in that asset for the long haul and may not notice lucrative investment opportunities that arise during this HODLing period. If the investment coin does not originally have any potential for growth, keeping it for years only means keeping useless stuff. Investors should thoroughly research the market to buy and HODL a coin with a serious promise of appreciation.
It takes time to reap benefits. HODLing is a time-intensive strategy, yet without a guaranteed result. The fact that you have kept the asset for a decade does not mean that you are subject to significant rewards for your waiting. A poorly picked asset may also indicate the depreciation of initial investment in the long run.

When to HODL?

For a true HODL adherent, the best time to HODL is right now and to never give up HODLing despite dramatic market volatility.

The popularity of the HODLing method is fueled by well-spread believes about the mainstream adoption of cryptocurrencies, prevalence of electronic coins over traditional fiat, and an increasing democracy of the world’ governments toward Bitcoin and other altcoins.

But actually, it is very hard to predict the best time for HODLing because of the infancy and loosened regulation of the cryptocurrency industry.

Can You HODL Stocks?

HODLing is a long-term investment strategy commonly applied to cryptocurrencies. Still, this method is also popular among stock investors who purchase and own securities for a prolonged spell. Indeed, in the stock market, the HODLing strategy can bring more tangible results then that in the crypto landscape because stock prices are less volatile and more predictable than cryptocurrencies.

Watch video about HODL