HODL: What Does It Mean and Where Does It Come From?

It is a rallying cry by the blockchain community encouraging the weak hands to hold on to their positions whenever the price rises to stratospheric heights or starts plummeting down to earth. Lamborghini supercars have, for a long time, been used as status symbols by wealthy crypto investors, especially those that can attribute a bulk of their wealth to blockchain-related activities. For instance, if the asset is in the middle of a bear market, there will be fewer buyers than there are sellers. For big investors, a falling market might not offer the right conditions to sell. They have to wait for buyers to come in to absorb their large orders.

• Then, that person is left with «a coin they don’t want at a price they can’t sell it [at].»
• Mr. Duggan is also the author of the book «Beating Wall Street With Common Sense» and has contributed news and analysis to U.S.
• It functions as a medium of exchange and can also be held as an asset or investment.
• That means that you’re missing an opportunity for potential gains in those markets.

HODL helps connect people in the Web3 ecosystem and encourages the crypto community to focus on the positive aspects of blockchain technology. The HODL memes bring levity to stressful situations, and the phrase inspires fellow investors to stay strong when markets decline. All in all, the shared struggles and triumphs of HODLing create a sense of camaraderie among crypto traders. When the markets are unstable, HODLing can be a strategy to consider.

Trading vs. HODL: Who Makes The Biggest Profit?

The utility of HODLing, like any investment strategy, has its limits. Even a long-term cryptocurrency investor would be well-served to articulate clear goals and to monitor the emerging space for systemic risks. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. There is no difference between HODLing a cryptocurrency and a buy-and-hold strategy. You can HODL a stock through its volatility because you believe in the company’s future success.

Therefore, traders interested in crypto need to carefully understand what they’re investing in with crypto. The legendary volatility of cryptocurrency is due to the fact that it’s driven entirely by sentiment, since no hard assets or cash flow back cryptocurrencies (with the exception of stablecoins). Many crypto coins, maybe even most of the 10,000 or so in existence, may end up worthless. It’s worth noting that ‘market timing’ — the act of trying to predict future price movements — is notoriously difficult and risky, even for seasoned investors. Satoshi Nakamoto, the creator of Bitcoin, designed it as a medium of exchange and a store of value, suggesting a long-term use case. Therefore, many investors view any time as a good time to HODL as long as it aligns with their personal investment strategies and risk tolerance.

Crypto hodl vs. trading

It can be difficult for even professional traders to time short-term trades. And there are psychological biases that negatively impact investors’ decision-making. The meme also acknowledges novice crypto investors that they are not skilled enough to profit from short-term trades amid the notoriously volatile crypto market. But in general, the idea of investing for long-term, rather than short-term, gains is not a new one. I’LL TELL YOU WHY,” their message read (this time spelling “hold” correctly).

• Many newer investors will start out HODLing by using a dollar cost-average strategy.
• It is not only a popular term but is also considered an investment strategy.
• It’s a tricky game and quite challenging for traders to time their transactions exactly right so as to maximize their profits each time.
• You are solely responsible for conducting independent research, performing due diligence, and/or seeking advice from a professional advisor prior to taking any financial, tax, legal, or investment action.

The HODL strategy has since its origin been used as a community anthem used whenever the price of a digital asset has been rallying. The idea is to discourage selling at the top, which could possibly trigger a reversal of the asset’s price. Some say you should HODL until your coin is worth a sum that you’re happy with and then sell and take the profits. However, there’s always a chance that prices may continue to rise after you’ve sold and you may end up regretting your decision to not wait longer.

HODL or…?

Due to their highly volatile nature, cryptocurrencies provide great opportunities for traders to build up long and short positions frequently. However, “hodling” can provide more safety to investors, as investors are not exposed to short-term volatility and can avoid the risk of buying high but selling low. This typo quickly caught on within the forum and then spread across the wider crypto community. Since then, it has been adopted by crypto traders and investors as an acronym for ‘Hold On for Dear Life,’ representing a steadfast approach to holding cryptocurrencies amidst market fluctuations. If you’re curious about making HODL a part of your portfolio, we can help you get started. DYdX’s exchange offers dozens of advanced trading features for crypto traders, including fee-free perpetuals.

• While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service.
• Although hardware wallets are less convenient to use, HODLers are hanging on to their assets for years, so they only have to worry about keeping the device safe until it’s time to sell.
• Moreover, many investors believe that it’s still early days for crypto and there are still incredible gains to be made.
• The term whale means a very large marine mammal that lives in the ocean.
• Each investor should make a decision based on their goals and risk tolerance.

The HODL token operates using the Binance Smart Chain, and HODL token owners can earn Binance Coin rewards. At the same time, Bitcoiners use HODL as a form of encouragement during crypto winters, literally reminding each other to HODL onto their bags. There are several more words that we did not cover in this guide but we are sure you will run into as you interact with other community members. Be observant, keen, and keep an open mind when interacting with other enthusiasts in chat forums and on social media.

What if I don’t ever want to see this again?

With cryptocurrency, Morrison says, the importance of patience is even higher. The volatility is more extreme, but the long-term gains have been quite appealing. A marketplace for cryptocurrencies where users can buy and sell coins.

• A self-custodial wallet is strictly managed by the wallet holder, meaning there’s no centralized intermediary between the trader and their crypto.
• Public’s Recurring Investing feature can help you use this strategy by automating your crypto investments.
• On these chains, anyone can lock («stake») their coins to earn a percentage-rate reward over time for their help securing the network.
• When you hodl one of the short-lived cryptos, that promised trip “to the moon” turns into a deep-sea dive with no return ticket instead.
• Meanwhile, BUIDL encourages people to roll up their sleeves and build decentralised applications, platforms and tools that improve the crypto ecosystem.

As the project rises in popularity and utility, the value of the project’s token also rises. Continue reading to learn more about how it came to be, why it is considered an investment strategy, and other words that you may want to be acquainted with if you wish to be a part of the community. The first step for a beginner in the blockchain ecosystem is to find out where all the important conversations happen, including social media platforms and chat forums. Next, you should learn the terminology, and part of that is identifying the unique terms and phrases used by members of the community, what they mean and how to use them effectively. If a «whale» sells a lot of their stake, it can cause the price of a cryptocurrency to dip by flooding supply, he explains.

Pros and cons of the HODL strategy

Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. HODL means holding on to an investment position no matter how volatile the price action gets.

What does HODL mean in crypto?

But these phrases have extended beyond crypto to other assets, such as stocks. During the run-up in the stocks of GameStop and AMC in 2021, individual traders rallied around the phrases, egging each other on to continue to hold or even buy more on the dips. The exact origin Hexn of HODL is well established, and the context surrounding it offers a good lesson to cryptocurrency traders and those who would like to get started trading crypto. Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first.

Is HODLing a good strategy?

Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The fall was possibly a result of a ban of third-party payment companies from working with Bitcoin exchanges from China’s central bank (People’s Bank of China). The author loaded the post with typos and upper cases to express his firmness in his simple holding strategy. This Article does not offer the purchase or sale of any financial instruments or related services.

Register On Phemex Now To Begin Trading

They’re holding for the long-term and looking to build life-changing wealth. You only sell in a bear market if you are a good day trader or an illusioned noob. In a zero-sum game such as this, traders can only take your money if you sell. Bitcoin has only been around since 2009, giving it a limited long-term track record compared with stocks, bonds, real estate and other assets. Others have argued that the stubbornness and close-mindedness of HODL culture is “cult-like,” blinding the community to any legitimate criticisms of Bitcoin as an investment or a currency. There’s no question the HODL strategy has paid off well for GameKyuubi and other Bitcoin investors that have held onto their crypto investments.

But investors who were spooked into selling their BTC in past downturns have lived to regret those decisions. Crypto pump and dump is an investment scheme in which instigators buy large positions in low-cap (market capitalization) coins or tokens before shilling these assets to other investors. The intention is to create an artificial price increase leading to a substantial profit.

While it looks like an acronym – one of those terms like FBI or KFC that abbreviates a word into its initials – HODL is simply a misspelling of the word hold, albeit one that caught on for the silliness of its mistake. Bankrate follows a strict
editorial policy, so you can trust that our content is honest and accurate. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. At Bankrate we strive to help you make smarter financial decisions.

Crypto forums may preach the benefits of HODLing, but there isn’t definitive proof that it works for crypto investments in the same way it has traditionally worked for the stock market. Crypto investors quickly retrofit HODL as an acronym for “hold on for dear life,” an encouragement to other crypto investors not to sell when prices fall. The term originated from a 2013 online post to the Bitcointalk forum where the typo appeared. The price of Bitcoin in 2013 was volatile at the time, surging to over $950 at the beginning of December, 2013, up from just over $130 in April of the same year. The poster encouraged people not to sell and that they were «hodling» [sic]. HODLing is a sound investment strategy that has been successfully applied even within the traditional markets; however, its efficacy depends on the investor’s goals.

That’s good news because it’s not easy to do this, even under the best circumstances. Timing the market requires expertise and a talent for predicting shifts in the market that most regular traders don’t possess. HODL is a misspelling of “hold” and an acronym for “hold on for dear life.” It refers to an investing strategy where you buy crypto with the goal of holding onto it for the long haul, regardless of market conditions. Crypto markets are highly volatile, which means that investors often find themselves second-guessing their decisions. In the short term, if you’re advised to hold, it suggests just hanging tight as all is probably good, so there’s no reason to sell up but it’s also not worth buying loads more just in case things go tits up. If you see the value dipping or surging before your eyes, it can be easy to think that you need to buy more or sell the fucking lot, but you can just breathe…and hold…and hope it all steadies out in your favour.

Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Cryptocurrencies continue to gain more attention as an investment opportunity due to the remarkable breakouts in 2017 and 2020. The trend of financial decentralization and currency digitalization provides room for growth to cryptocurrencies.