What is ‘HODL’?

‘HODL’ is a popular acronym that is widely used within the cryptocurrency industry today. You’ve likely already come across it — that might be why you’re reading this guide — while researching different coins and tokens online, particularly if you’ve been reading about them on social media, on forums, and through other online communities where the term is most commonly found.

HODL is not just ‘hold’ spelled incorrectly. It actually stands for ‘hold on for dear life,’ and it is usually associated with a cryptocurrency investment strategy that, as the name suggests, involves acquiring a particular asset and then sitting on it for as long as possible. In this AAG Academy guide, we’ll explain what HODL is in more detail, as well as where it comes from.

The HODL mantra is most commonly used by cryptocurrency traders who like to take a long-term approach with certain investments. It’s not a difficult one to understand since the phrase it is derived from tells you almost all you need to know. When using the HODL strategy, traders buy certain coins and tokens — those they are most optimistic about — then hold them.

HODLing is primarily based on the hope that cryptocurrencies often (but certainly not always) become more valuable over time. Therefore, those who buy and hold them for long periods, rather than selling them for a small profit when their value spikes, could potentially enjoy much more significant gains in the long run.

Some see HODLing as much more than that. Those who firmly believe that cryptocurrency will one day bring huge economic change, one in which digital currencies overtake traditional currencies as the primary choice for payments, hold on not just for greater gains later on, but also because they feel their assets will be even more critical in the years to come.

HODL is the antithesis of FUD and FOMO — two other acronyms often associated with crypto investing that stand for ‘fear, uncertainty and doubt’ and ‘fear of missing out’ — and other activities or emotions that are considered bad news for an investor’s potential profits. It is often recommended to those who panic sell when crypto prices fall, only to lose out on a rise later.

Origin of HODL

Although HODL is not considered a typo today, it is widely believed that it does come from one. The first use of the term dates back to a 2013 post on a cryptocurrency forum, when one user who went by the name ‘GameKyuubi’, posted a supposedly drunken and amusingly muddled rant in which they labeled themselves a bad trader.

“I AM HODLING,” read the title of the post on Bitcointalk. “WHY AM I HOLDING? 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.”

GameKyuubi vowed to change their failing trading strategy by simply holding onto their assets instead of frequently buying and selling in search of more frequent profits. “You only sell in a bear market if you are a good day trader or an illusioned noob,” the post continued. “The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.”

Within an hour of publishing the post, GameKyuubi’s rant had become a meme. This spawned countless other HODL memes that often referenced iconic battle moves, such as 300 and Braveheart. What made the post even more famous was that, of course, GameKyuubi was right; the price of Bitcoin at the time was around $950, and we all know where it went from there.

Is HODL the right crypto strategy?

HODLing is a strategy that many swear by, particularly for those who are new to investing in cryptocurrency. It is a very low-effort approach that does not require constant monitoring of cryptocurrency markets and events; you can simply acquire the coins or tokens you’re interested in or feel bullish about, then essentially forget about them for a while.

Some investors are so adamant that HODLing is the right strategy that they simply won’t consider any other tactic. They’ll keep hold of their tokens no matter what — even if they have the potential to reap significant gains during an incredible bull run, or the cryptocurrency market crashes and they face large losses.

What’s more, HODLing is a strategy that can be adopted at any time. No matter what state the market is in, or how much the assets you’re interested in are currently worth, a HODLer will tell you it’s never a bad time to buy and hold since the belief is that the best is yet to come. So, is HODLing the right cryptocurrency investment strategy for you?

HODLing certainly isn’t a bad strategy when we look at how the values of major coins and tokens have risen over time. If you acquired enough Bitcoin or Ethereum in the early days and you’re still holding onto those assets now, you’re likely a very wealthy individual. However, for most investors, it’s likely that a more balanced, middle-of-the-road approach is best.

It’s not always a good idea to hold onto assets no matter what. Not all of them will get more and more valuable over time, and many — especially in the cryptocurrency industry — have been known to enjoy a brief period of highs followed by a complete crash that they never recover from. With that being the case, it’s always advisable to have clear goals from the outset.

Successful investors usually have a considered investment plan in place before they start parting with their capital. This typically guides their decisions with each investment, and outlines their goals and objectives. Perhaps most importantly, it considers how much they might hope to profit from each investment, and how much they are prepared to lose on them.

A balanced strategy certainly is a guarantee of success — nothing is when it comes to investing — but it can help investors mitigate the significant losses that can be suffered when using a HODL-no-matter-what approach.

Sources:

• Hodl
• Hodl a typo takes hold as a sound cryptocurrency strategy