What Does HODL Mean — Use It as an Investment Strategy

If you want to know what does HODL mean, how this term came to be, as well as when and what you need HODL, you’ll find this guide more than useful. In addition to explaining what hodling is, you’ll also learn how to use it as an investment strategy.

We’ll finish this guide by listing the main advantages and disadvantages of holding and explaining the difference between trading and holding.

HODL Meaning

HODL is a slang term that originated as a typo when a Bitcointalk forum user by the name of GameKyuubi misspelled the word hold in his post about the Bitcoin price.

Namely, in 2013, the price of Bitcoin experienced a real rollercoaster. First, it jumped from $15 to more than $1,100, only to drop again from $716 to $438. At that moment, GameKyuubi wrote “I am hodling” instead of holding. This term soon became slang for buying and holding Bitcoin and other crypto assets, regardless of their price.

However, this term has a different meaning in the world of crypto investors. They use it as an acronym for Hold On for Dear Life. In this case, HODL refers to the buy-and-hold strategy.

HODL is also a DeFi token within the Binance Smart Chain network that enables earning passive income and BNB rewards.

The History of HODL

The term HODL was created on December 18, 2013, when a crypto trader called GameKyuubi posted “I am hodling” on the Bitcointalk forum. With this, he alluded that he would not sell his bitcoin even though its price had fallen sharply because he was a bad trader.

This term soon became popular within the crypto community. On that note, in 2015 someone placed it in the Urban Dictionary, describing it as a call to BTC holders not to sell their coins after their price starts to go up.

In 2017, tech news websites started publishing articles about HODL describing its meaning and origins.

HODL culture is still present in the crypto world today. Namely, crypto investors are using it as an acronym for Hold On for Dear Life, which refers to buying and keeping cryptocurrencies. You’ll also find a crypto-related site called the Daily Hodl.

HODL as an Investment Strategy

The HODL crypto investment strategy refers to the long-term approach to investing. Hodlers believe that digital currencies will one day replace fiat. On that note, they encourage people not to sell their crypto assets based on the fear and greed index. Instead, they should buy and hold their crypto assets in the long run.

The proper hodling strategy is not to buy when the prices go up and not to sell when the prices go down. HODL is also a form of passive investment strategy. Its idea is to ignore short-term changes in the value of cryptocurrencies and hope for a return on investment in the future.

The HODL strategy can best be explained in the example of Bitcoin since most investors believe in its long-term value. Moreover, BTC is a good indicator of how volatile the crypto market is. Namely, since the beginning of 2023, its price has varied from a low of $16,547 in January to the current $41,662.

This means that all investors who have held their BTC since the beginning of the year have gained approximately $25,115. Furthermore, there are indications that BTC could be worth $60,000 by the end of 2024, which would be an even greater return on investment.

This doesn’t mean that the price of BTC will not vary during 2024. However, followers of the HODL strategy will not let price changes affect their decision to buy or sell it.

When Should You HODL?

There is no written rule on when to use the HODL strategy since this choice is individual. However, HODL can be useful when the crypto market is unstable. This means that hodlers should hold their crypto assets until the market stabilizes.

Most investors will start hodling when they are convinced that a certain cryptocurrency has the potential for long-term returns. Moreover, if a certain altcoin suddenly appears on major exchanges, it’s a sign that it may be a good time to buy and hold it.

On the other hand, investors should stop hodling if major crypto exchanges, like eToro and Kraken, remove a certain cryptocurrency from their list. It is worth noting that now, in the US, eToro customers can trade only Bitcoin, Bitcoin cash, and Ethereum on the platform.

Another way to know when is a good time to start hodling is to stay up to date with the latest trends in the crypto world. If there is interest in a particular altcoin, it’s a sign that its value may increase in the future. Then again, if there is less and less talk about a certain cryptocurrency in the crypto community, it’s an indication that its value may drop, making it unsuitable for hodling.

Remember, hodling is a strategy intended for long-term investors. This means that short-term investors should choose a different approach.

What Should You HODL?

Investors HODL cryptocurrencies that they believe have the potential for long-term returns. On that note, some choose to HODL well-known cryptocurrencies, such as BTC and ETH due to their established place on the market and widespread use.

At the same time, other investors will choose to HODL new crypto coins, such as Bitcoin ETF and Bitcoin Minetrix. Why? Because they hope their value will increase due to their innovative use cases.

That said, to reduce risk, many investors will diversify their hodling portfolios. This means that they will HODL well-known digital currencies and new crypto coins that show great potential. This rule also applies to crypto stocks that show a good potential for return on investment.

HODL Pros and Cons

Here are the main advantages and disadvantages to hodling:

Is Hodling Better Than Trading? 

The main difference between trading and hodling is that the former refers to selling and buying cryptocurrencies in short intervals. On the other hand, the latter refers to holding crypto assets in the long run.

With that in mind, hodling is more suitable for new investors. Why? Because it doesn’t require technical skills and continuous monitoring of market trends. Hodling is also less risky since hodlers won’t sell their crypto assets when price fluctuations occur. Moreover, unlike traders, hodlers won’t have to deal with emotional issues, such as FOMO.

Conversely, traders can achieve higher returns than hodlers because they’ll get to take advantage of the volatility of the crypto market. Likewise, they’ll have greater control over their crypto assets since they’ll choose when to buy and when to sell them.

So, is hodling better than trading? Both options are good. However, new investors should start with hodling before they start trading. In this way, they’ll learn how the crypto market works. After that, they can combine both strategies to get the most out of their investments.

Conclusion

Now that you know what HODL is, when the term originated, and why investors use it, keep in mind that the crypto market is very volatile. In other words, every investment is risky and hodling doesn’t guarantee long-term success.

Moreover, many digital coins and tokens will not exist in the future, which is why it’s important to HODL only those that show potential for long-term success.

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