HODL Explained

HODL Explained , hold on for dear life on the roller coaster

HODL is a term very commonly used by cryptocurrency investors and refers to a person holding on for dear life in a bear market

The world of crypto uses a huge amount of slang when compared to other technologies from the past such as personal computers or the internet. 

Both have had their fair share of course, like WYSIWYG, which stands for What You See is What You Get on a screen as an example. 

Yet, crypto is full of strange words and acronyms and it’s only just over 12 years old. 

It’s likely that in the future there will be dictionaries dedicated to the strange and wonderful language of crypto. 

Today we’re looking at the word HODL which originated from a misspelling of the word HOLD.

 

The origins of the now-famous HODL

The word HODL came into being by accident when a BitcoinTalk user by the name of GameKyuubi wrote on the thread “I AM HODLING” on December 18 2013

GameKyuubi wrote:

I AM HODLING

I type d that tyitle twice because I knew it was wrong the first time. Still wrong, BTC crashing WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER.”

And so it was that the word HODL suddenly came into being during a drunken, self-deprecating rant and is now a well-used term in the crypto investment world. 

HODL has taken on so much significance in the crypto community that December 18 is known as HODL day in homage to the day that the “hodl” post was now famously written and yet another crypto legend and acronym was born.

Since those early days when the word HODL just meant holding, the term has evolved so to speak and the crypto community converted HODL from a simple spelling mistake to the acronym 

‘Hold On for Dear Life’ very much describes the roller coaster emotion behind hodling.

 

So what is hodling exactly?

In the simplest terms, it’s when a person holding crypto holds on for dear life during a downturn in price and refuses to sell even as the price continues to plummet. 

It is an investment strategy that is also known as buy and hold in traditional investment circles.

When we talk about hodling we are looking at a buy and hold strategy and are effectively talking about holding onto crypto although it could also be a stock for the long-term regardless of the prevailing market volatility. 

The idea being that over the long term investment assets tend to trend upwards and so just by hodling and riding out the bumps we should in theory still come out ahead and often tends to be the case.

Those that are highly experienced traders be that in crypto, stocks or other commodities can strategically and cleverly ride the bumps and profit with the goal to get in and out at the exact right time as often as possible. 

There are no guarantees of course but it is at least possible with enough knowledge and risk tolerance. 

On the other side of this coin are the completely inexperienced investors who have bought into a crypto or other asset and are tracking the price daily. 

The moment the crypto or asset starts dropping in price they panic and may sell off all or part of their holdings in order to stem the losses. 

Inevitably though, many times, prices level off and after some time may start to climb again and even end up higher than when the storm hit leaving those that sold rather frustrated. 

For this category of investor, a hodl strategy could make more sense as long as they stick to holding on for dear life no matter what happens. 

Of course, it’s easier said than done but is probably a wiser overall strategy when compared to panic buying and selling which rarely ends well for anyone!

 

There is another hodl which is actually a crypto token

It’s worth noting that there is an actual cryptocurrency token called HODL.  That HODL operates on the Binance smart chain and shouldn’t be confused with the general crypto term HODL that we are speaking about here.

 

Knowing when it’s time to HODL

When we look at long-term investing or hodling in general we have to make a clear distinction between traditional investing, blue-chip stocks like Apple, commodities or even FIAT currencies and crypto trading. 

While nothing is of course certain and anything could indeed happen, the likelihood of a company like Apple suddenly going kaput is pretty unlikely. 

It could be a safe, if not very exciting investment for the long term as Apple is well established, is very liquid and operates in a highly regulated market. 

One could therefore buy Apple stock and hold onto it for 10 years without too much worry. 

The same cannot be said with as much conviction about crypto. 

Crypto is highly volatile and still very much in its infancy. A crypto could rise exponentially in ten years or disappear from the face of the earth with equal probability. 

This, therefore, makes crypto hodling quite different to a traditional buy and hold strategy with stocks. 

Naturally, it’s important to do as much research and due diligence as possible before making an investment decision and not having all the eggs in one basket would certainly minimise the risk. 

It’s probably fair to say that the most natural hodlers are those that believe in the long-term future of crypto and perhaps have a decent understanding of the crypto universe and how all the pieces of the jigsaw puzzle fit together. 

This can help the investor make slightly more informed decisions and keep their nerves steady as they are holding on for dear life during a freefall!

 

Conclusion

HODL is not just a bit of fun crypto folklore, it stands for an investment strategy of sorts where it could make sense to hodl and just hold on for dear life when things begin to look grim, think 2022 & 2023!

Quite possibly the storm will come to an end and things will eventually bounce back with vigour. 

Of course, nobody knows for sure and in the world of crypto with its wild volatility, it can take nerves of steel to hodl, especially when the amounts involved are significant! 

Whatever the case, it may make more sense to stay calm and hodl rather than panic sell and come to regret it later.

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