It is important to know when the right time is because this metric varies from one individual to another. The right time to sell will largely depend on the goals of investing. If these goals are achieved, the coin holder can sell at any price in the market; otherwise, they continue to HODL. HODLing campaigns are also witnessed whenever the price of an asset starts falling. In such a situation, any more selling could lead to further price correction and the best action for the long-term investors is to discourage weak hands from letting go and thereby mitigating further losses.
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There’s little sense in earning a 10% annual percentage yield if a coin’s price plummets by 25%. Dozens of high-profile blockchains now use a Proof-of-Stake (PoS) consensus mechanism to validate transactions. On these chains, anyone can lock («stake») their coins to earn a percentage-rate reward over time for their help securing the network. Staking on blockchains like Ethereum, Solana, or Polygon earns passive income with minimal effort. What started as a typo in an online forum has developed a real meaning of its own.
- DYdX’s exchange offers dozens of advanced trading features for crypto traders, including fee-free perpetuals.
- The term is, however, used to describe huge losses, and even though ‘huge’ is considered a relative term, losing a lot of coins qualifies as being rekt.
- Now that you understand what it means to HODL, let’s dive into some of the other popular crypto-related terms that are worth knowing in order to participate in conversations amongst fellow blockchain enthusiasts.
It’s also commonly come to stand for «hold on for dear life» among crypto investors. In early bitcoin forums, someone posted a message that spelled the word «hold» wrong, and readers interpreted it as an acronym «hold on for dear life,» Saddington explains. «Now, it’s become a meme of sorts, so that when the prices are highly volatile, bitcoin buyers say ‘HODL!'» Saddington describes himself as «a long-term HODLER.» In that case, investors buy when prices are low, hold an asset while the value increases, then try to sell it before the price dips.
HODL: A typo that became a crypto investing strategy
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.
- Generally speaking, we recommend owning stocks for at least five years.
- Different countries and parties express different attitudes towards the use of cryptocurrencies.
- HODLing is based on the idea that, historically speaking, the market will ultimately trend upward.
- The misspelling set off a frenzy in the online world of crypto investors and the term quickly became a meme.
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.
Pros and cons of the HODL strategy
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.
- As a result, hodlers are theoretically safe from some trading tendencies, be it buying at a high price or selling at a low price (the latter is also known as “SODL” – a less commonly used term derived from “HODL”).
- Buy-and-hold investing occurs when individuals purchase an asset—often stock—and hold it for a period of many years.
- HODLing requires a long time horizon, so it’s usually best for investors that don’t need access to their cash for a long time.
- To make sense of such crypto-slang, CNBC Make It asked Peter Saddington, a serial entrepreneur and early bitcoin investor who runs a bitcoin community called The Bitcoin Pub, to break it down.
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Is HODL Worth It for Individual Investors?
It’s important to state that debating whether or not a HODL strategy is worth it when investing in cryptocurrency is entirely different from the question of whether to invest in cryptocurrency at all. Cryptocurrency is still relatively new and isn’t subject to the same regulation as traditional investing. As with any investment, you should make sure you understand cryptocurrency before you begin investing. Buy-and-hold investing occurs when individuals purchase an asset—often stock—and hold it for a period of many years. Rather than trying to time the market, this strategy simply operates under the assumption that the asset’s price will increase over time.
- It’s important to state that debating whether or not a HODL strategy is worth it when investing in cryptocurrency is entirely different from the question of whether to invest in cryptocurrency at all.
- The goal of HODLing is to wait out recessions and other dips in the market, with the goal of cashing out when the market improves.
- It’s a healthy part of a sensible cryptocurrency investing strategy when combined with serious research into the quality and long-term prospects of your cryptocurrencies.
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- Learn where the term came from and why it’s a useful approach for amateur traders.
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.
What is hodl in the crypto world and its advantages
For cryptocurrency maximalists, HODL represents more than a strategy for reigning in FOMO (Fear of Missing Out), FUD (Fear, Uncertainty, and Doubt), and other profit-eroding emotions. Long-term crypto HODLers stay invested because they believe that cryptocurrencies will eventually replace government-issued fiat currencies as the basis of all economic structures. Should that occur, then the exchange rates between cryptocurrencies and fiat money would become irrelevant to crypto holders. FUD is another acronym that stands for ‘Fear, Uncertainty, and Doubt.’ Part of the reason why cryptocurrency markets are so volatile is that they are vulnerable to public perceptions. Whenever there is negative press coverage, the value of the entire market will fall and the reverse is true.
Is HODLing a Good Investment Strategy?
Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. However, staking is only worthwhile if you believe your crypto will, at minimum, maintain its value.
Can You HODL Stocks?
Depending on your investment strategy and risk profile, HODLing can be a good approach. However, crypto markets are highly unstable and there is no guarantee that HODLing will be successful. Even if HODLing doesn’t seem right to you, there’s still lessons to be learned from this approach. HODLers are a social bunch—their strategy relies on support from other investors, who urge them along and convince them not to sell if they are feeling unsure.
Why do people in crypto love to HODL their coins?
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Dive deeper into crypto trading with dYdX
News & World Report, Seeking Alpha, InvestorPlace.com and The Motley Fool. Mr. Duggan is a graduate of the Massachusetts Institute of Technology and resides in Biloxi, Mississippi. The investor sentiment cycle is a visual representation of the emotions a typical investor experiences based on the performance of the investor’s portfolio over time. Several altcoins that soared during the 2021 crypto boom, such as Dogecoin (DOGE), Avalanche (AVAX) and XRP (XRP), are down more than 88% from their all-time highs. Bitcoin’s extreme volatility has produced a handful of horrendous annual returns throughout the years. For example, Bitcoin shed 50% of its value in less than 48 hours of the Covid-19 pandemic-induced sell-off in March 2020.
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That means that you’re missing an opportunity for potential gains in those markets. Jason Porter, senior investment manager at Scottish Heritage SG, says the HODL strategy can be particularly useful for crypto investors during market weakness, such as 2022’s crypto winter. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.
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In crypto, the term is used to refer to individuals or institutions with an outsized investment in a particular asset. Mooning is a related term to ‘When Lambo’ that also refers to stratospheric price rallies. If the price of an asset rises very fast, the community equates that rise to a ride on a rocket to the moon which gave rise to the phrase going to the moon or ‘mooning,’ for short. Trying to beat the market by timing reversals is an expert’s game, and most newcomers to crypto are not experienced at doing that. HODLing thus becomes a safe play for such individuals and institutions looking for long-term gains rather than gaming the system. In the case of Bitcoin, if you’d purchased and HODLed your coins from the start, your profits would be unprecedented.
Can you HODL stocks?
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.