Patience Pays: How HODL benefits you in the long run

The first time you saw “hodl” on a crypto forum, you probably thought it was just a typo for “hold”, right? Well, technically, you weren’t wrong, as the term was derived from a misspelled title on a Bitcoin forum. User GameKyuubi posted “I am HODLING” to declare that he was holding onto his coins as that was a better strategy for newbies than to predict the ups and downs of the market. The crypto community has since come up with their own interpretations for the word, including the most popular one which states it is an acronym for “Holding On For Life”.

So what does it mean?

Hodling or ‘holding on for dear life’ denotes an investing strategy in which investors purchase cryptocurrencies and hold them for an extended period of time. This helps investors avoid losses from the short-term volatility of cryptocurrencies and gain returns from long-term value appreciation.

Is there a difference between HODL and buy n hold?

Not really. Hodling is quite similar to the buy-and-hold strategy that has been prevalent in the stock market scenario for quite some time. They both aim to reap the rewards of long-term investment but the former is more commonly used in the crypto market.

The two sides of HODL strategy

Pros

• Simple: Since the process is basically to buy and hold, there is no need for complex strategies and even beginners can try their hand at it.
• Time-efficient: Since it is a one-time purchase before holding, traders don’t need to constantly participate in trading, freeing up time for other endeavours.
• Opportunity to learn: As they are not spending every waking moment timing the market, investors are left free to explore and discover the nuances of trading at their own pace. This makes them smarter traders in the long run.

Cons

• Requires greater capital: In hodling, you need a large amount of capital to obtain sufficient returns and your funds are inaccessible for a period of time. This means investors could face a need to sell assets in case of an emergency.
• Patience is required: Since HODL is a long game, profits will take time to show up. This means waiting and watching for what seems like an infinity while other traders play the field, which may not be suitable for all.
• Low risk = low returns: Playing it safe means you could miss out on whirlwind deals that day-traders capitalise on, making your final profit margin lesser than what it could have been.
• Defeats the purpose of crypto: Using crypto as a holding instead of a means of payment distracts from its true purpose and delays/prevents mainstream adoption of digital currency. This could prove detrimental to the growth of crypto.

Final word? Hodling is a game of chance that may not prove to be everyone’s cup of tea. As always, make sure to DYOR (do your own research) and take calculated risks.

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