HODL is one of the terminologies that has emerged due to the emergence of cryptocurrencies. While it appears to be an acronym –like the FBI or KFC – HODL is merely a misspelling of the word hold. Albeit one that has gained popularity due to the absurdity of its error.
The word HODL arose from an erroneous typo in a 2013 message board post on the Bitcointalk forum. Some marketers have retrospectively interpreted HODL to mean “hold on [for] dear life” since then. This revisionism is a backronym when words are added to an existing acronym to give it a similar or new meaning that was not intended when the phrase was created.
Many cryptocurrency investors use the hodl approach because they don’t want to deal with too much information or effort to get the most out of their assets and tokens.
It is one of the easiest ways to invest in cryptocurrencies, and today we will go over its definition, how it all works within the realm of cryptocurrencies, and its history in full.
HODL Meaning In General
HODL is a misspelling of the word “hold” in the concept of purchasing or hoarding any sort of cash.
It is also known as “hang on for dear life.” You now understand what the term “hodl” means. We shall explain what the word “hodl” implies in the crypto world in the following sections.
HODL is a cryptocurrency investment strategy in which an investor concentrates on the long-term value of a single currency. The strategy is solely based on the expectation that cryptocurrencies will eventually replace government-issued FIAT currencies.
At this point, cryptocurrency holders may find that the exchange rates between cryptocurrencies and FIAT money are no longer meaningful.
What Does HODl Mean In Crypto?
HODL is the most popular crypto strategy for stable and volatile currencies such as Bitcoin, Ethereum, Dogecoin, etc. The word “HODL,” used by cryptocurrency traders, is claimed to be a misspelling of “HOLD.”
The word swiftly spread across trading forums and became ingrained. According to others, the phrase also means “Hold on for dear life.” In any case, the word refers to a basic strategy. Regardless of whether the price of cryptocurrency is rising or falling, you should always purchase it and never sell it.
Even when cryptocurrency’s price is falling, buying and never selling does not appear to be a wise investment. HODLing, on the other hand, is one of the most effective investing methods.
Why? Users are not purchasing to sell in the short term, where minimal margin gains and dangers are high. They are buying to conserve money and create a long-term profit. When looking at a volatile cryptocurrency like Bitcoin, one could see that the price fluctuates drastically over one or three months. However, if people look at the history chart of Bitcoin since its inception, they will notice one thing: it has been consistently rising.
Because cryptos are unpredictable, short-term activities that benefit from short-term ups and downs are dangerous. Long-term investments are risky, but investors cannot ignore the increasing trend.
If someone had purchased 500 USD worth of Bitcoin in 2011, they would now have between 3.7 and more than four million dollars, depending on the particular date of purchase and transaction. However, 11 years is a long time to keep onto cryptocurrency. HODL techniques are typically implemented over one year.
In the video below by Louis Thomas, he talks about holding cryptos. He talked about earning greater profits by holding or not holding your cryptos depending on the prevailing market situation. He has explained this superior approach in a very smart and effective way that will help you learn more about HODL.
Where Did The Word “HODL” Initially Come From?
The precise genesis of HODL is widely understood. The context around it provides an excellent lesson for cryptocurrency traders and anyone looking to start trading.
On December 18, 2013, Bitcointalk member GameKyuubi said, “I AM HODLING,” as part of a rant on the difficulties, if not futility, of trading cryptocurrencies. Those who try to time the market fluctuations may find themselves purchasing high and selling low, gradually or rapidly depleting their wealth.
The word quickly became a social media cliché, and the misspelling lives on internet message boards such as Reddit’s famed Wall Street Bets board.
HODL has become a symbol of its long-term commitment to digital currency for cryptocurrency investors. Those that buy and hold cryptocurrency may refer to themselves as “HODLers” and extol the merits of having “diamond hands” on Reddit or Discord communities. These phrases reflect their stated reluctance to sell volatile assets such as cryptocurrency. These expressions contrast with “paper hands,” or individuals eager to sell when volatility rises.
However, similar terms have spread to other commodities such as equities beyond cryptocurrency. Individual traders rallied behind the words throughout the run-up in the stocks of GameStop and AMC in 2021, encouraging one other to hold or even purchase more on the troughs.
HODL Cryptocurrencies
If you’re wondering why people HODL bitcoins and what a hodler is, keep reading to learn from our ideal example.
On May 22, 2021, a crypto meltdown wiped out $1 trillion in less than a week. Bitcoin, which accounts for more than 40% of the global crypto market, fell 30% to US$30,000, its lowest position since January, after beginning the day at the US$40,000 level.
Previously, on May 12, Bitcoin plunged 13% when Elon Musk rescinded Tesla’s agreement to accept it as a payment option at the firm. The creator and CEO expressed reservations about the cryptocurrency’s significant carbon impact.
There was also a market concern, as a pair of seemingly contradicting tweets concerning bitcoin left investors perplexed.
However, the most significant fall occurred when Chinese officials signaled a crackdown on cryptocurrency use across the country. The central bank eventually issued a warning to Chinese financial institutions and enterprises not to accept digital currencies as payment or to provide services using them. The most satisfactory outcomes are obtained by those who just HODL.
Nonetheless, shortly after this occurrence, Bitcoin (BTC) regained its value and proceeded to rise, while investors who panic-sold their BTC hodling lost money.
Investors who used the HODL approach, on the other hand, rode out the sharp dip in value and waited for the token’s value to rise again.
In reality, Bitcoin (BTC) reached a new all-time high of US$69,044.77 on November 10, 2021. That was a value that Bitcoin had never seen before, demonstrating how powerful the HODL technique was for this particular asset.
Also, because of their extreme volatility, cryptocurrencies offer excellent possibilities for traders to establish long and short positions regularly. However, “hodling” might give investors additional security since they are not exposed to short-term volatility and can avoid the danger of buying high and selling low.
3 Reasons To HODL Your Blockchain Assets
When dealing with bitcoin assets, the hodl technique might be advantageous for various reasons.
Long-term Profit
As we previously stated with the SOL token, the token increased by 10,000% in a single year. Despite having plummeted significantly before that moment, BTC also reached its most recent all-time high in 2021.
Long-term gains have been attained in the past when looking at the top cryptocurrency coins.
Everyone that purchased BTC or SOL early in their growth is currently experiencing enormous dividends. The intriguing element here is that many will most likely continue to HODL the coins and profit from their future rise.
HODLing coins achieve long-term gain for a year or longer. Some may even advise HODLing until you genuinely need the assets for specific use-cases, which are more crucial.
Transfer of wealth across generations
So, if you own cryptocurrency, your family may become wealthy since the asset may be passed down to the next generation.
Many millennials are aware of this and are taking advantage of hodling.
According to a CNBC Millionaire Survey, over half millionaires had at least 25% of their assets in cryptocurrency.
The findings indicate a significant age difference in wealth creation from cryptocurrency, with younger investors able to make large fortunes from the rise in the price of Bitcoin.
HODLing coins achieve long-term gain for a year or longer. Some may even advise HODLing until you genuinely need the assets for specific use-cases, which are more crucial.
Hodling Crypto against Inflation
Cryptocurrencies are becoming increasingly popular, particularly among inflation-averse investors. Many investors regard cryptocurrency as an excellent inflation hedge than even gold.
Compared to many FIAT currency alternatives, HODLing cryptocurrencies may result in far more ongoing value preservation. This is why owning crypto, particularly Bitcoin, with a very restricted quantity and a known inflation timetable that decreases over time, maybe a good idea.
Wrap Up
Overall, HODLing cryptocurrencies have been a suitable cryptocurrency strategy utilized by thousands of investors. Such investors have avoided panic-selling once their assets dropped in value, resulting in enormous returns.
This is not true for every cryptocurrency asset, and some tokens have never fully recovered in value.
After all, bitcoin investing, in general, is quite dangerous due to the industry’s volatility.
It is one of the most simple cryptocurrency investing techniques that have withstood the test of time and shown to be helpful in the long run.
Hopefully, you are now completely aware of and understand what you need to know about hoarding bitcoin holdings for years, if not decades.
This can be a useful tactic, especially for people who prefer to leave their assets alone. However, like with any technique, conduct your research before choosing the best option for your unique circumstances. Finally, this simple method might provide newbies with several advantages.