HODL is a misspelled term for the word ‘hold.’ This term stands for ‘hold on for dear life’. HODL has great significance among crypto investors. The term became a new normal in 2013 with the typo on the Bitcoin talk forum. This poster was compelling people not to sell, although they were holding. The term also implies people do not sell when there is a down point in markets.
Many crypto investors believe that people should only sell the products if there is an illusion like a crypto bubble or if they are good day traders. In every situation they should hold, this was a primary purpose of HODL.
In this article, we will learn about HODL, its features, and why crypto investors should adopt this strategy. Moreover, we will discuss the pros and cons of HODL. The article will discuss why HODLING is a great strategy for greater returns for crypto traders. The article will discuss tips for initiating a HODL strategy to help beginners in crypto trading.
Who Is the Pioneer of HODL?
There is no specific identity for the pioneer of the HODL. It was used on online crypto-related posts for the first time, mostly by the Crypto Twitter audience and other forums.
GameKyuubi is the person who first uses the misspellings of HODL. In an online forum with Bitcointalk, he used this word and became popular.
HODLING as a Strategy and Guiding Philosophy
HODL is an acronym that is a mantra for all crypto enthusiasts for all long-term cryptocurrency investments. This approach tells people to hold their coins until their best market investment. For the people who are cryptocurrency maximalists, HODL has great importance. It serves more than a strategy. People who have a long-term plan stay invested. They believe that all cryptocurrencies will take the place of government fiat currencies.
Through the HODLING strategy, traders deal with cryptocurrencies like Bitcoin, Etherium, etc., on a long-term investment. And when the crypto-market is doing great, and the cryptocurrencies are all on an increased value, the investors can either sell or take the risk and hold for a greater return.
When Should Crypto Traders HODL?
There are certain principles for HODL. According to these principles, the best time to HODL is always and forever. It indicates that HODL is an ideological belief about all long-term blockchain technology and long-term cryptocurrencies. It covers the cryptocurrencies and all other communities for HODL. So you don’t need to wait for a specific time to HODL your cryptocurrency investment.
If an investor has a long-term plan, this HODLL is best for investors. This is not a good thing for short-term investors. For short-term investors, it will not bring so many benefits. This is only the best choice if an investor is willing to wait for any long-term strategy.
Can You HODL Stocks?
It is a general belief that HODL has an association with cryptocurrency investors. In reality, the HODL strategy is broad. It is not just associated with cryptocurrency. Many stock investors can HODL if they have some long-term goals. The stock prices are always less volatile in comparison to crypto prices.
Therefore, stock investors can buy HODL with a long-term price appreciation with less volatility than with cryptocurrencies.
The HODL Coin
HODL has a Defi token for the Binance Smart Chain. The HODL coin was introduced in the crypto market in May 2021. HODL compels the traders to hold all their tokens for the reward system.
This reward is valid and distributed after three years. The generation of tips takes place from all the taxes of the traders. There is the conversion of tax amount into BNB tokens.
Difference Between HODL and Buy-and-Hold Strategy
These terms work similarly to one another. There is no significant difference between these two terms. Traders can easily HODL a stock he has through volatility. It gives the success of the company. In this same way, a trader has access to holding a cryptocurrency for an extended period. This will help the trader indicate that their coins will work better in the future.
The HODL coin is used for the HODL cryptocurrency. It has a use and expression in every crypto community. This HODL coin operates all the Binance Smart Chain. Therefore, all owners of this coin can easily get Binance Coin rewards.
Why Should a Trader HODL Cryptocurrencies?
Cryptocurrency is a digital currency. Blockchain technology supports this digital exchange. The purpose of this exchange is to be a medium of exchange. It also holds assets and all investments. The most common examples of cryptocurrencies are Bitcoin, Ethereum, and Ripple.
In cryptocurrency, HODL refers to a strategy that means a buy-and-hold process. According to this strategy, investors keep their assets for a long time to get a profit. This is because traders are so active in all their transactions. Therefore, it generates profit for them.
There is a high volatile rate because it allows all traders to have long-term benefits. This HODL offers safety to all traders. In addition, it generates innovative ways by which traders can avoid high rates.
Advantages of HODL
The HODL strategy is so beneficial. It states that a trader can quickly get many benefits in the long term. It provides an excellent method. It offers various helpful solutions for all main markets. It is getting popular day by day. It is a dire need of the investors.
Here are some more advantages of the HODL strategy.
Traders Can Avoid Investment Risk
By the strategy of HODL, a trader can hold their cryptocurrencies. In this way, traders can easily control their risk of investment. This strategy limits the number of coins and all buying and holding portfolios. When a trader buys and has limited cryptocurrencies, he can easily avoid the risk of losing all investments. It is a major benefit of HODL.
Traders Can take advantage of Market Volatility
Along with other benefits, HODL provides the use of market volatility. A trader can easily take advantage of every market movement. It will help them in maximizing their profits. For instance, by this strategy, a trader can sell a cryptocurrency when the price suddenly rises. It will increase the benefit for the traders. On the other hand, with this strategy, a trader can buy more coins after falling the cryptocurrency price. It will help them in increasing their portfolio.
Long Term Gains
This HODL strategy also provides a long-term gain for investors. For example, suppose the trader notices that cryptocurrency prices are not decreasing and constantly increasing. In this situation, they can hold the cryptocurrency and make long-term gains. This will expand the portfolio for long-term benefit.
Great Control Over Wallet
HODL provides a holder with the great benefit of controlling the wallet. A holder has a significant advantage in controlling the wallet. A holder can easily decide when he wants to buy and when he wants to sell cryptocurrency. A holder can also choose the investment timeline of the mutual funds. A holder can also make decisions as a manager for his cryptocurrency.
HODL provides various benefits. Flexibility is one of them HODL gives a flexible way while investing. This flexibility indicates that a trader can easily make decisions for buying according to the fall and rise of crypto prices. A holder also has the benefit of holding a specific position for profit.
Low Level of Commission
With the HODL strategy, holders will not have to pay high commissions. The investor will only pay the commissions for all purchase and sale transactions. In this way, the rates of commissions will be quite low compared to mutual funds. Mutual funds usually charge more commissions. This HODL strategy is beneficial in this regard.
These cryptocurrencies also have high yield protection. The reason for yield protection is that the price of cryptocurrencies can suddenly increase and decrease. In a short period, the investors have the benefit of making a significant amount of profit by investing appropriately and by investing for an appropriate time.
Disadvantages of HODL Strategy
Although HODL has several benefits, there are several risks that HODL investors have to deal with. The drawbacks of the HODL strategy are the cost that crypto traders have to deal with as part of enjoying the perks of HODLING
The following are some risks of HODL.
Rate of Return
The prices of cryptocurrencies constantly increase and decrease. The prices are always volatile. These ups and downs will make specific risks for the investors. The conventional ways of investment do not give more benefits. But the rate of risk is low in traditional modes of investment. In this way, this HODL can bring significant risks.
Money laundering is also a significant risk with HODL type of investments. Cryptocurrencies have a future with unknowns. Therefore, it will bring a risk of money laundering. In this regard, illegal transactions and money laundering can occur in HODL investments.
Unfavorable Policies in Certain Situations
There are some countries and parties that have different attitudes toward cryptocurrencies. In this way, the growth of investors will be difficult for those situations and countries. It will also decrease the value of an asset for the traders. These policies will create a different and unfavorable situation for the investors.
Does It Make Sense to HODL?
For many, it makes sense to HODL. The value of Bitcoins is increasing every day. For this reason, a long-term buy-and-hold strategy will benefit the investors.
There are many reasons which make HODL worthwhile.
This HODL strategy allows the trader to work freely from the conventional cycle of greed. It will enable the trader to make rational decisions, and a holder can take advantage of attractive prices.
Change In Mindset
This mindset of the buy-and-hold mindset of the investor flourishes. With the decline of prices, great opportunity arises for the investor, which is helpful for the investor in the long term.
Less Investment of Time
If a trader and investor is busy and cannot keep an eye on all investment strategies all day, then holding the money till the best time is the best strategy. A trader will be able to invest less time and gain more profits. This is a significant sign indicating HODL is the best thing to do.
No Capital Gains
By the strategy of HODL, a trader can avoid all capital gains. Moreover, the investments in this regard are tax-free. This no capital gain benefit is the most remarkable benefit of the HODL. This sign indicates that HODL is an excellent strategy to make.
Can You HODL Other Strategies?
Cryptocurrencies are not just the only assets for the HODL strategy. An investor will be able to HODL other assets like traditional stocks or gold. HOLDING a cryptocurrency brings some risk because of the ups and downs of the cryptocurrency market. Although it also brings many rewards for the traders.
For other assets like stocks and gold, usually, the chances are low. Thus, an investor can follow the strategy of HODL for another investment.
Best Time to Sell
There is no specific time limit for the trader to sell a coin. There are many reasons and strategies for investors to know when to deal.
An investor should keep an eye on the best profit gaining time. The best time to gain profit is usually when the price of cryptocurrency increases. The more the expenditure grows, the more a trader gets a chance to get more profit. Alternatively, a trader should focus on holding crypto or stock when the price is low.
Tips To Start a HODL Strategy
There is everything in this universe that follows a pattern and a strategy. So to do a HODL method, an investor needs to follow these tips.
Start With the Research
An investor must do thorough research to start with the cryptocurrency purchase. An investor must also have a thorough knowledge of the team behind the cryptocurrency project. If an investor understands crypto exchange and the team, he can buy cryptos highly confident. If an investor still finds any difficulty in HODL strategy and crypto purchase. He can learn automatic trading. This trading will help a trader in generating parameters, and it will be helpful for the trader to have a mechanical trade.
For HODL, an investor needs to purchase some cryptocurrencies. A trader can easily purchase it from many exchanges. Therefore, the trade of crypto is a critical business. A trader should buy crypto when he knows the whole process and the tricky techniques of crypto trade.
When a trader has successfully purchased cryptos, the second tip he needs to follow is to keep it safe in a desired good place. Traders and investors can do it easily with a software or hardware wallet. Hardware wallets are usually safer. They are offline, and there is less chance of hacking into hardware wallets. There are some perks of software wallets as well. Software wallets are easy and very convenient for traders.
Monitor the Market
Once an investor has the cryptocurrency, the storing process is also complete. The next thing a trader needs to do is to monitor the market strategies. He needs to know when the price of crypto is high in the market and when the price is low in the market. This marketing technique will help in generating more profit in less time.
These four tips are the roots of HODL. If an investor follows the tips safely, he can generate profit and other benefits with the least time and money investment. These tips work for physical trade, and an investor can follow the tips in the digital marketing of cryptos.
HODL is an excellent trading strategy. A trader and investor need to follow a specific time for the profits. It works well for investors who are working on long-term strategies. Using the technique of HODL, an investor can double the deposit. The investors will have to wait for more periods to gain more benefits. The primary purpose of this HODL is to involve better holding and buying techniques.
HODL, in general, is a perfect strategy for investors. In case of high prices, traders can sell the cryptos and gain profits. At the time of low costs of cryptos, traders can buy cryptos and acquire their portfolio. These HODL benefits work for real and digital trade. For some investors, it can bring more benefits. For some investors, the level of benefits may decrease. It only works well for the people willing to wait and ready to take a risk.
HODL gives benefits to various investors with various conditions. Thus, investors should know all the tips and techniques for this trade to get more benefits.