There were numerous misconceptions regarding cryptocurrency back when it first emerged. Numerous others assumed it to be a fraudulent Ponzi scheme or an unregulated market of some sort. And yet, in the midst of it all, were the investors who, despite the odds, continued to hold onto their crypto holdings because they believed in what crypto would become. These people are some of the world’s wealthiest people. There’s a reason we have a phrase like “Hold on for dear life” to describe this strategy.
Therefore, our team of experts at block farm has created this essay to explain what (HODL) “hang on for dear life” implies.
What Is “HODL”(Hold On For Dear Life)?
As a typo for “hold,” the term “HODL” was first used in a cryptocurrency community forum in 2013. Its usage caught on quickly. The term “Hold On for Dear Life,” or “HODL,” has become common parlance in the crypto world to describe the practice of holding onto one’s digital assets despite sharp market fluctuations.
An investor’s blind trust in a product or idea, such as someone holding on to stocks of Blockbuster since Netflix was on the rise, may appear like a negative trait. Financial analysts and planners say it’s a sane reaction to an unpredictable market.
Theresa Morrison, a professional financial planner based in Tucson, Arizona, says, “The holding element of it is crucial because it’s a new business, and as a small investor you are not well toward being able to catch the fluctuation and to trade the assets.”
The first HODLer in 2013 was, without a doubt, not overconfident in their ability to time the market. Nonetheless, the message implied optimism that Bitcoin’s situation would improve over time.
How come I’m holding on? Their message read, “HOLD ON, I’LL TELL YOU WHY” (with the correct spelling of “hold” this time). This is because “I know I’m a lousy trader” and “I am a bad trader.” The message went on to argue that the banner was better off doing nothing, whereas pros, especially in a bear market, have an opportunity to earn money in the short run.
What Makes HODL A Crypto Strategy?
Like any other investment method, HODLing has its limitations. Even a patient cryptocurrency investor would do well to define their objectives and keep an eye on the developing market for signs of systemic risk.
However, the concept of investing for lengthy growth as opposed to immediate profit is not novel. Instead of trying to time brief peaks and valleys, a tried-and-true rule of thumb for investment in the stock market is to only put money in if you’re willing to maintain it there for at minimum five years.
Morrison argues that, in the case of cryptocurrencies, the value of patience is even more essential. Long-term returns have been fairly enticing despite the higher volatility.
The $1,000 you put into Bitcoin on the day of the initial HODL post is now worth a lot more than it was back then. In the meantime, though, many investors have made a loss trading Bitcoin by buying at the peak and selling when prices dropped.
Successful gains are seen by many long-term HODLers as proof of the approach, which can at times border on fanaticism. Users who sell some of their cryptocurrency holdings, even having made considerable returns over the long term, are sometimes shunned in online communities devoted to the asset class.
One user on the Reddit CryptoCurrency forum recently remarked, “There is nothing improper with locking your profits.” Do n’t let anybody make you feel guilty for it. If you decide to lock in your earnings at 50%, you will still be in the black.
Maximalists in the cryptocurrency market see HODL as more than just a way to combat profit-eroding emotions like FOMO and FUD. Those that HODL for the long haul do so on the faith that digital currencies will one day supplant government-issued fiat money as the universal medium of exchange. If that happens, crypto holders won’t care about the current exchange rate between crypto and fiat currency.
The maximalist HODL mindset is best encapsulated, not surprisingly, by a meme. When Neo asks Morpheus whether he’s telling him that Bitcoin will be worth millions in the future, the latter responds: “What are you attempting to tell me?” Instead, Morpheus says, “When you’re ready, Neo, you won’t have to.”
What To Know Before You Embark On HODL
Anyone may pick up some wisdom from the crypto HODLers, not just crypto devotees. You’ll be less inclined to lose your cool in the midst of market volatility if you have faith in the worth of the investments you’ve made. Morrison suggests that before making any purchases, you should have a clear grasp of the reasons for your investment. The question of whether your analysis has shifted since you first considered selling it comes up when you’re feeling the want to do so.
But that doesn’t mean you can sit on your investments forever without worry. The widespread adoption of cryptocurrencies and blockchain technology is still a ways off, and it’s possible that neither may end up being the game-changing breakthrough their proponents hope they will be. There are also occasions when it would be beneficial to trade, such as paying out some profits when you’ve achieved your objectives.
However, HODLing can be a useful default.
“An investing policy statement is essential if you intend to purchase cryptocurrency. According to Morrison, “you definitely want to understand what is happening to sway your mind to sell.” “If not, you ought to be a HODLer.”
How To HODL
According to these rules, HODLing is a good idea right now and forever. A real believer would never sell their tokens, even if the market were to experience significant volatility or a crash. The more time you spend thinking about the future of blockchain, cryptocurrency, and the groups that have evolved around them, the more ideological HODLing becomes.
Frequently Asked Questions
What does "HODL" stand for, exactly?
“Hang on for precious life,” an abbreviation for “hold on to your cryptocurrencies for the long haul,” has become a motto among crypto fans.
For those who are unfamiliar, please explain the HODL method.
The phrase “hold on for dear life” is often shortened to HOLD. If you’re in it for the long haul, the HODL strategy calls for you to keep holding an asset irrespective of how the market is doing.
I want to HODL cryptocurrency, but I don't know how long.
For cryptocurrency to be considered a “hodl,” the investment must be held for an extended period of time. Numerous Bitcoin holders intend to preserve their holdings for at least a few more years, in keeping with the average four-year market cycle of the cryptocurrency.
Can you recommend a coin that would be ideal to HODL?
To maximize your portfolio’s potential, you should only HODL the tokens that are a good fit for your investment strategy. We recommend keeping Polkadot (DOT), HUH Token (HUH), and Cronos (CRO).
The principle of HODL tends to be an easy investment strategy but yet one of the hardest ever practiced. Its not easy to watch the fluctuations in the PnL of assets as they are being held for a long period of time. This method is highly advised for the investors who happen to remain stable in the worst conditions.