The cryptocurrency niche is full of special expressions, memes and jokes that are incomprehensible to people outside the blockchain industry. For example, most coin lovers know about the developer Laszlo Haneche, who spent 10 thousand bitcoins on two pizzas in May 2010.
Taking into account the subsequent growth of the BTC rate, today this amount could bring almost $ 500 million, that is, the lost profit turned out to be huge. Another common phenomenon within the crypto community is the so-called hold, hodle or HODL.
This word is really popular. Especially often it can be found on social networks and on forums during the collapse or subsidence of the cryptocurrency market. For example, this week Bitcoin showed a record drop in dollar terms, dropping to 45 thousand dollars. Soon after, we found a reminder of a hodl in the form of such a picture on the Reddit social platform.
Here it becomes clear that “hodl” can also be used as words of support for cryptocurrency investors. However, in fact, behind the hodl lies a whole philosophy of investing funds for a long period.
What does hodl mean?
Hodl is a misspelled word “hold” which itself means “hold” or “keep”. In the context of cryptocurrencies, we are talking about the long-term storage of coins, despite what is happening with their course . That is, a hodler is a person who is ready to keep his bitcoins for many years and does not plan to sell them in the near future. Moreover, this is relevant for sharp market crashes, the last of which occurred in March 2020.
Recall that the markets for cryptocurrencies, stocks and other financial instruments collapsed on March 12. This happened due to people’s fears about the coronavirus, quarantine and further restrictive measures. Then Bitcoin collapsed by tens of percent. However, after a few days, his course began to recover.
Similar situations happened before – and it was one of them that became the reason for the formation of a «hodl».
In January 2013, Bitcoin was given about $ 15. At the end of November and the beginning of December of the same year, the value of the cryptocurrency exceeded the level of $ 1,100, that is, BTC increased approximately 73 times. However, this was followed by a massive drop: on December 18, 2013, the asset price fell from $ 716 to $ 438, that is, by almost 40 percent.
Naturally, it was a shock for investors – and especially for those who contacted cryptocurrency the day before. One of them turned out to be a user under the pseudonym GameKyuubi. He created a discussion page on the Bitcointalk forum, calling it “I AM HODLING”.
In general, these were the arguments of a drunk person with a mass of errors and typos. In them, he shared bad trading skills that did not allow him to get rich. That is why he decided to go – that is, just hold bitcoins for the long term.
The Legendary Publication That Started Hodl
Here is a quote from the iconic post.
Bitcoin is collapsing, why am I holding it then? I’ll tell you why. This is because I am a bad trader and I know that I am a bad trader. Yes, you are all good traders who can spot the peaks and bottoms, and then bang bang bang bang – and now you have a million dollars without any problems. At the same time, weak traders think “oh no, the asset is falling, I need to sell”. And then smart traders who know a lot will buy the asset at a lower price. And you know what? I do not belong to this group. When traders buy the asset again, I will already be part of the market. So guess who such traders will be fooled by? Not me!
Of course I should have sold. I should have sold a second before everyone else sold and bought a couple of moments before everyone started buying. But yes, not all are masters like you. You should only sell in a bear market – even you are a good trader or a novice full of illusions. Everyone else is holding at this time. In such a zero-sum game, traders can only take your money if you sell the asset.
Then the author of the publication clarified that he had already drunk whiskey because of everything that was happening. Obviously, this explains the mass of typos in the original publication.
So we make an intermediate conclusion. Hold or walk means holding the cryptocurrency for a long time, not panicking due to falls and not getting rid of the asset in the red. Funnily enough, this strategy does work, although it takes patience.
By the way, then representatives of the cryptocurrency community found a way to decipher the word, even with a typo. In the comic version, the abbreviation HODL means “Hold on for dear life”, that is, something like “hold on for a great life”. Thus, cryptocurrency lovers are reminded that good blockchain projects do become more expensive over the years and can generate large incomes.
Who is Hodl for?
As a result, hodle assumes long-term – and not only – storage of cryptocurrency. In essence, this is an investment that is opposed to trading. Traders usually try to make a profit in short periods of time: from a few minutes to days.
Here, the opposite is true. The holder specifically acquires an asset and, roughly speaking, forgets about it for several weeks, months or years. Naturally, he monitors what is happening in the market so as not to miss possible growth, but in general he expects to go into cash or stablecoins – that is, cryptocurrencies pegged to the dollar – much later.
It is important to note the basic hodling here. A cryptocurrency project for long-term storage should be chosen thoroughly, that is, after a detailed study of the idea, developers and their goals. However, if you invest in a little-known start-up project, Hodl can end up in complete loss of funds.
Such cases have already happened. Take a look at the chart of the CBDAO BREE coin. Its developers could not stand the fall of the market in the fall of 2020 and disappeared: they removed social networks, dropped the liquidity of BREE trading pairs and forced the rate to sink to zero. Such a walk is definitely not worth it – although it is impossible to predict such events in advance.
CBDAO Bree price chart
In this case, it is better to choose popular cryptocurrencies, time-tested – like Bitcoin, Ethereum and others.
Benefits of cryptocurrency hodl
The advantages of the cryptocurrency hodle are obvious. If an investor expects to hold coins for several months or years, he does not need to react to temporary market crashes, be nervous about what is happening, and also update cryptocurrency rates and his own portfolio a hundred times. He knows that after some time the situation on the market will be much more attractive, so he can let the situation take its course.
Now this is especially true when BTC is bought by Tesla, MicroStrategy, Square and other giants of the global industry. Obviously, at least Bitcoin is not going to die and fall to zero.
The most popular crypto-hodler meme is a still from the movie «300 Spartans». Here, the hodlers are presented in the form of courageous warriors who do not plan to give up even in the most unattractive market conditions.
Most popular hodle meme
Disadvantages of cryptocurrency hodl
The disadvantages of the hodl come from its advantages. If the holder of the crypt is ready to keep it for several years, he may not carefully follow what is happening on the market and miss a profitable opportunity. For example, there was no point in running bitcoins from 2017 to 2019, since in December 2017, BTC reached a local maximum of $ 20,000, after which it collapsed. That is, ideally, investors could sell coins at their peak and buy much cheaper.
Of course, Bitcoin is now worth $ 50,000, so even the 2017 hodlers did it right. However, the opportunity to make money and enter a position was more profitable, which means that it was possible not to lose several years of waiting and have more money.
The second disadvantage of hodl is the inability to insure against the collapse of cryptocurrency projects, that is, their death. On a cryptocurrency exchange, traders for such situations put stop-loss orders or orders to automatically sell an asset if its rate falls below a certain level.
However, the approach of hodlers and traders is completely different, so it is not a fact that it is worth comparing them. In addition, the stop loss can be triggered, after which the cryptocurrency rate will return to its previous level – and this happens in a matter of minutes. In this case, the trader loses part of the money and the position.
Examples of bitcoin hodl
Some patient lucky ones who have managed to keep bitcoins for years do become fabulously rich. The last example of this happened yesterday.
List of old bitcoins that have already been spent
An early Bitcoin hobbyist transferred 100 BTC, which he mined in June 2010. Then they cost a few pennies, but now you can get $ 5 million for them. This amount is a reward for patience and faith in decentralization.
In May 2020, the anonymous person also transferred 50 BTC mined in 2009 to the trading platform. And he got rich too.
We believe that the hodl strategy pays off in the cryptocurrency market. Coins can really grow in value over time and be profitable. Hodl also has disadvantages, because in case of indecision or unwillingness to respond quickly to the situation, investors will have to wait for the price recovery for several years. However, in general, this tactic is suitable for beginners.
At the same time, we remind you that any investment decisions must be made independently. And investing in something is worth only after a detailed analysis.
