HODL is a popular term commonly used in the cryptocurrency world. It is so popular that it has become slang for new investors in the crypto industry.
According to the experts at SoFi Invest, the HODL meaning “originated as a misspelling of the word “hold.” Ultimately the acronym Hold On for Dear Life was attached to the term.” HODL can be described as an investment strategy where investors hold on to their cryptocurrencies even if there is a plunge in the market.
In most cases, when there is a plunge in prices, some investors panic and decide to sell their cryptocurrencies. But for someone implementing the HODL strategy, he or she will hold on and wait for better times.
The term HODL is derived from a post from one of the famous bitcoin forums called Bitcointalk. One user who got to drink a little too much whisky posted a message full of typological errors.
In his message, he narrated how people called him a ‘bad trader” when he failed to sell his coins in a recent price plunge. However, the plunge in the prices didn’t stop him from HODLing.
What was a drunken typo posted on a forum in December 2013, has turned to be a popular term in the 2020’s cryptocurrency world. The term is now common in many bitcoin forums and it is used to encourage traders not to rush and sell when prices plunge.
An overview of HODL
In this age where bitcoin and other cryptocurrencies have become so popular, several trading strategies have emerged. Unlike day trading, HODling doesn’t involve full-time and that’s why it may be the best strategy for beginners. Rather than buying and selling dictated by short-term price shifts, the HODL strategy involves buying and holding with the hopes that prices will rise in the future.
Succeeding in the HODL strategy needs a lot of emotional strength. This is because of the high volatility nature of Bitcoin and other cryptocurrencies.
There are generally two opposing forces of the HODL trading strategy. The first one is referred to as FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt). The two antagonistic forces cause investors to sell and lower prices and no or less profit than earlier anticipated.
Pros and cons of HODL strategy
Those who have experience in bitcoin trading claim that the HODLing strategy is not the best way of maximizing profits. As much as these assertions may hold some truth, other strategies may as well fail if they are not implemented correctly.
As mentioned before, HODLing may be an ideal strategy for people who are just getting started with cryptocurrency trading. This is because it is not as complicated as day trading that requires you to commit a lot of time to it.
One major disadvantage of HODLing is that traders cling so much on their coins – meaning that they can’t be used for their intended purpose. Besides, HODLing coins make it difficult for bitcoin to expand and become a mainstream digital currency.
Although it began as a typo several years ago, the term HODLing has had a great impact on the cryptocurrency world. Many traders continue to rely on the strategy to make profits from bitcoin and other cryptocurrencies.