HODL Overview, History, Benefits and Risks of HODLING

It can be difficult for even professional traders to time short-term trades. And there are psychological biases that negatively impact investors’ decision-making. The meme also acknowledges novice crypto investors that they are not skilled enough to profit from short-term trades amid the notoriously volatile crypto market. But in general, the idea of investing for long-term, rather than short-term, gains is not a new one. I’LL TELL YOU WHY,” their message read (this time spelling “hold” correctly).

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 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.

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It’s been an interesting journey, one that’s taught me a lot about the value of patience in investing. As a firm believer in the HODL strategy, I apply it to my own investments. Because it’s a relatively new and rapidly growing market, prices are constantly shifting. To protect your investments, it’s essential to know the ins and outs of your strategy of choice before making a purchase. Overall, HODL best suits investors with a multi-year vision for their preferred crypto projects.

• HODL may also refer to the HODL token on cryptocurrency exchange Binance’s Smart Chain.
• To protect your investments, it’s essential to know the ins and outs of your strategy of choice before making a purchase.
• With buy-and-hold investing, you generally choose stocks based on a company’s long-term success and prospects.

Under the post-COVID low-interest context with inflation expectation, investors also hold cryptocurrencies for value reserve. The term ‘HODL’ originated from a post in a Bitcoin forum, where the user accidentally typed ‘hodl’ instead of ‘hold’ during a discussion about trading strategies. The user referred to themselves as an ‘illusioned noob’ who was poor at trading, thus choosing to ‘hodl’ during a period of high price volatility. Yes, the principle of HODLing can also be applied to the stock market. It’s similar to the buy-and-hold strategies used by many stock market investors. The idea is to purchase stocks and hold onto them for a long period, regardless of market fluctuations.

Why do people in crypto love to HODL their coins?

That’s good news because it’s not easy to do this, even under the best circumstances. Timing the market requires expertise and a talent for predicting shifts in the market that most regular traders don’t possess. HODL is a misspelling of “hold” and an acronym for “hold on for dear life.” It refers to an investing strategy where you buy crypto with the goal of holding onto it for the long haul, regardless of market conditions. Crypto markets are highly volatile, which means that investors often find themselves second-guessing their decisions. In the short term, if you’re advised to hold, it suggests just hanging tight as all is probably good, so there’s no reason to sell up but it’s also not worth buying loads more just in case things go tits up. If you see the value dipping or surging before your eyes, it can be easy to think that you need to buy more or sell the fucking lot, but you can just breathe…and hold…and hope it all steadies out in your favour.

• However, the price fell again after the 2017 surge; it hiked again during the COVID-19 pandemic and hit a new high of over $58,000 in early 2021.
• You only sell in a bear market if you are a good day trader or an illusioned noob.
• This is because HODLING is a middle ground where you’re assuming things will work out, instead of putting more money into assets, or selling assets when part of you thinks they could be worth much more tomorrow.
• Today, it refers to investors who refuse to sell their crypto regardless of how high or low prices trade.
• HODLing campaigns are also witnessed whenever the price of an asset starts falling.
• HODLing is an investment strategy derived from the traditional financial world where it is referred to as buy and hold.

Because HODLing requires a long-term commitment, many investors use cold storage devices, such as hardware wallets, for security. Cold wallets keep a user’s private keys offline so their assets are not easily hacked or stolen. Even high-quality hot wallets are generally more vulnerable to hacks than cold wallets.

How does the Federal Reserve impact stocks, crypto and other investments?

HODLing is often seen as a simple and effective strategy, especially for those who prefer to avoid the stress of daily trading. It’s based on the belief that over time, the value of cryptocurrencies will increase despite short-term price swings, a view held by many crypto traders. The term HODL was born from a post titled ‘I AM HODLING,’ made by a member named GameKyuubi, on the famous Bitcoin forum Bitcointalk in December 2013.

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• Users can earn rewards in Binance coin by depositing their tokens in a liquidity pool.
• The idea behind this strategy is to encourage users to contribute to the development of cryptocurrency infrastructure, which will ideally may raise the value of digital currencies.
• The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice.
• Whether you’re new to crypto or a seasoned investor, it’s important to make informed decisions about strategy—and that means knowing your options.

The HODL approach has been rewarding for long-term investors in Bitcoin, Ethereum (ETH) and other leading cryptocurrencies, as it’s helped them navigate extreme fluctuations in the crypto market. In no time, the term HODL spread like wildfire throughout the crypto world. Today, it refers to investors who refuse to sell their crypto regardless of how high or low prices trade. If you invested $1,000 in Bitcoin on the day of the original HODL post, it would be worth much more today. But there are countless people who have lost money trading Bitcoin in the meantime, buying it when it was high and bailing out after a disappointing fall.

Definition and Examples of HODL

The HODL token operates using the Binance Smart Chain, and HODL token owners can earn Binance Coin rewards. At the same time, Bitcoiners use HODL as a form of encouragement during crypto winters, literally reminding each other to HODL onto their bags. There are several more words that we did not cover in this guide but we are sure you will run into as you interact with other community members. Be observant, keen, and keep an open mind when interacting with other enthusiasts in chat forums and on social media.

• Cryptocurrencies are considered to be highly volatile assets, and it’s not unusual to see daily price changes of 20+% in either direction.
• Individuals who participate in shilling often have a stake in the asset, and by drumming up support for the project behind the asset, they are trying to build up buying pressure which could lead to a price gain.
• HODLing is simple to understand, but it requires a lot of patience, discipline, and conviction.

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.

What Is HODLING?

While there is incredible volatility in crypto, investors have earned the best returns of any asset class in the world simply by hodling their coins, as you can see in these bitcoin success stories. Since the original HODL forum was posted in December 2013, Bitcoin prices are up about 2,500%. Even investors who bought on the first day of 2018 and employed a HODL strategy are still up more than 17% on their investment. Cryptocurrency and blockchain technology are still relatively untested, and they may not pan out as the revolutionary innovation their supporters envision. There are also times when it may be prudent to sell, such as cashing out some gains when you’ve met your goals.

Can You HODL Stocks?

However, while “HODLing” might be a good strategy, it doesn’t tell you what to own. Buying and holding a poor investment can lead to years of bad returns, if not a total loss on the investment. The term almost immediately became a meme via social media, and the misspelling continues to live on in internet message forums such as the infamous Wall Street Bets board on Reddit. Here’s the origin of HODL and why it can be a valuable investing strategy. Bankrate.com is an independent, advertising-supported publisher and comparison service.

Other Crypto Slang Terms

Crypto forums may preach the benefits of HODLing, but there isn’t definitive proof that it works for crypto investments in the same way it has traditionally worked for the stock market. Crypto investors quickly retrofit HODL as an acronym for “hold on for dear life,” an encouragement to other crypto investors not to sell when prices fall. 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]. HODLing is a sound investment strategy that has been successfully applied even within the traditional markets; however, its efficacy depends on the investor’s goals.

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However, the difference between long-term value investing and long-term HODLing is the difficulty in accurately valuing cryptocurrencies. Ben Gagnon, chief mining officer for Bitfarms (BITF), says HODL is more of a mentality than an investing strategy. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.

Crypto Traders: To HODL Or Not To HODL?

When a stock or crypto’s price is at its lowest point, investors typically experience fear, anger and panic that can lead them to sell at the worst possible time. Likewise, when a stock or crypto price is at its highest, investors often feel excited and overconfident, prompting them to buy at the worst possible time. GameKyuubi explained in the post that he planned to “hold” his Bitcoin (BTC) investments because he knew he was a bad trader. You don’t have to be a cryptocurrency disciple to learn something from the HODLers. If you believe in the value of your investments, you might be less likely to panic in the face of market turmoil. HODL may also refer to a DeFI token on the Binance Smart Chain (BSC).

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.

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HODL helps connect people in the Web3 ecosystem and encourages the crypto community to focus on the positive aspects of blockchain technology. The HODL memes bring levity to stressful situations, and the phrase inspires fellow investors to stay strong when markets decline. All in all, the shared struggles and triumphs of HODLing create a sense of camaraderie among crypto traders. When the markets are unstable, HODLing can be a strategy to consider.

HODL Culture

As with many other popular memes, the origin of HODL can reportedly be traced back to a typo. Many or all of the products featured here https://hexn.io/ are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page.