HODL Meaning? Hold On for Dear Life HODL Definition in Crypto

The main difference is that HODLing often involves the support of a community on a crypto forum, which encourages investors to wait out rough periods in the market. The buy-and-hold strategy, on the other hand, has no social component. Today, Bitcoin prices are also down 59% in 2022 as rising interest rates have triggered a sell-off in cryptocurrencies and other risk-on assets.

After all, there’s a lot of crossover between these investment strategies. Investors who are concerned about losing a hardware wallet or can’t afford a high-quality cold wallet can choose to keep their assets on a centralized exchange, if they are comfortable with counterparty risk. As with any investment strategy, there are benefits and drawbacks to the HODL technique. “FUD,” “to the moon,” “DYOR”—there are so many industry-specific colloquialisms that newbies to the market could benefit from a crypto-specific dictionary.

What Is the Difference Between HODL and a Buy-and-Hold Strategy?

It doesn’t matter which cryptocurrency is in your portfolio, as long as you hold it for a few years (or more) before selling. The misspelled “HODL” quickly circulated among the crypto community, and soon after turned into an internet slang to indicate when a person holds bitcoin rather than selling it. Use of the term was later extended to include other cryptocurrencies.

• Also, you’ll get to discover ten other common phrases to use in blockchain forums and chat groups.
• There are thousands of cryptocurrencies on the market today, and the number of long-term winners in that group is much smaller.
• Cold wallets keep a user’s private keys offline so their assets are not easily hacked or stolen.
• In crypto, the comparable strategy to value investment would be ‘HODLing,’ which works the same way.

You will need to pay capital gains tax in Australia if you buy cryptocurrency and later sell or exchange it at a higher price — a crypto tax Australia. While Wall Street executives make long-term investments and Wall Street Bets traders have diamond hands. HODL culture has been a major help to long-term investors in Bitcoin and other top cryptocurrencies. But critics of HODL culture point out that the mindset only works if the value of cryptocurrencies continues to trend higher over the long term. Once-popular altcoins like OneCoin, BitConnect and TerraUSD are just three examples of cryptos that failed, generating a near-complete loss for any investors who employed the HODL strategy. The HODL community encourages other investors not to cash out of their crypto when prices rise and not to throw in the towel when crypto prices fall.

HODL: A typo that became a crypto investing strategy

While staking crypto could increase your gains over time, it’s riskier than holding coins in a hardware wallet. When Bitcoin’s price slumped in late 2013, user “GameKyuubi” wrote a post called “I AM HODLING” on the crypto forum Bitcointalk. In this thread, GameKyuubi advocated for amateur investors to hold their Bitcoin (BTC) positions as the coin’s value declined rather than day trading or panic selling. Each investor should make a decision based on their goals and risk tolerance. If you’re uncertain about your ability to play the market or want a long-term investing strategy, HODLing may be right for you. In fact, the HODL strategy was originally known as the buy-and-hold strategy, and is used in many investment areas, including the stock market.

• Be sure you know how long it takes to withdraw your digital assets and research the track record for each validator pool.
• The devotion among HODLers comes from the culture surrounding Bitcoin and other cryptocurrencies, says David Duong, head of institutional research at the cryptocurrency exchange Coinbase.
• Luckily, many believe that Bitcoin is still in its infancy and you may still be early if you start investing now.

The cryptocurrency world is full of exciting and interesting eccentricities, including the lingo. Hopefully, by going through this article, you have familiarized yourself with some of the more common unique terminologies used within the blockchain space. The term ‘flippening’ is used within the crypto circles to refer to a hypothetical moment in which the market capitalization of Ethereum surpasses that of Bitcoin. The latter is the oldest and largest cryptocurrency by network value and Ethereum’s market cap has trailed Bitcoin’s for several years. In crypto, the comparable strategy to value investment would be ‘HODLing,’ which works the same way. An investor identifies a project with great potential and invests in it for the medium to long term.

Cons of HODLing

The original crypto plunged to $4,000 before ending the year around $29,000. Indeed, the original HODLer in 2013 had no illusions about their ability to play the market. But the post conveyed a confidence that time would improve Bitcoin’s fortunes. We believe everyone should be able to make financial decisions with confidence. HODL ($HODL) is a cryptocurrency that was named based on the popularity of “HODL” as an expression in the crypto community.

• These terms stand in contrast to “paper hands,” those who are willing to sell when volatility ratchets higher.
• U.S. Treasuries (“T-Bill”) investing services on the Public Platform are offered by Jiko Securities, Inc. (“JSI”), a registered broker-dealer and member of FINRA & SIPC.
• It’s similar to the buy-and-hold strategies used by many stock market investors.
• GameKyuubi wrote his post on the 18th, attempting to communicate that he was changing tact to his Bitcoin investment.
• That BNB is then transferred to a reward pool and is distributed every seven days to investors who hold HODL tokens in their wallets.
• Other users found his spelling mistake hilarious and they became ‘hodlers’ too.

HODL, or “Hold On for Dear Life,” is now a widely known concept in the crypto community that refers to the strategy of not selling your digital assets, even amid extreme price changes in the market. And given Bitcoin’s latest bout of volatility, HODL remains relevant a decade later in 2023. It is used in the crypto ecosystem to refer to a strategy of holding onto bitcoin holdings through its various price fluctuations and volatility. The acronym is a misspelling of the word “holding” by a user on an online forum. Typically used by Bitcoin maximalists, a HODLing strategy is similar to the conventional buy-and-hold investing strategy. HODL may also refer to the HODL token on cryptocurrency exchange Binance’s Smart Chain.

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Decentralization is the major feature and advantage of cryptocurrency, as it is not issued by a central authority such as a country’s central bank. The misspelled term “HODL” circulated quickly in the forum and spread to other cryptocurrencies. Cryptocurrency investors use the term to refer to buy-and-holding hexn.io assets for a longer time horizon rather than making frequent trades. “HODL” is a term that is often used in the Bitcoin investment community. It is a misspelling of “hold,” with an interesting story behind it. It is not only a popular term but is also considered an investment strategy.

• So you buy, you hold on for dear life — hodl — and you build wealth in the long haul.
• The investor sentiment cycle is a visual representation of the emotions a typical investor experiences based on the performance of the investor’s portfolio over time.
• To understand and be part of conversations within crypto enthusiast circles, you need to know the community’s lingo.
• Inspired by the misspelling of HODL, crypto communities also encourage each other to SPEDN (spend) or BUIDL (build).
• “HODL” is a term that is often used in the Bitcoin investment community.

This form of ledger technology is what’s behind cryptocurrencies and other tech trends. Avoiding the urge to give in to fear, uncertainty, and doubt (FUD) is one of the hardest barriers to overcome. HODLing forces you to think about the long-term benefits of your strategy.

Why Should I HODL?

HODLing might not be the best strategy if the investor is looking for short-term gains. Even though traders don’t often sell their positions at the absolute peak (because they cannot predict it), HODLing over time generally will give you positive returns. Even if you bought in late 2017 at $19,000 and sold in early 2021 at $40,000, you would have had a 110% increase on your investment.

What is a “HODLing” investment strategy?

Disclaimer – Information found on our website is not a recommendation or financial advice. Our website and marketing collateral use reference rates as an indicator only and should not be used for decision making. HODL may not be the right approach for every crypto investor and every cryptocurrency.

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HODLing is an easier and more rational method to take when investing in blockchain projects. Value investors such as Warren Buffett use this strategy when investing whereby they identify undervalued companies, buy the stocks cheap and hold them for several years. The idea is that the value of the stocks would have risen considerably within this period. Others say HODL until your coin becomes a fully spendable currency and you won’t need to worry about having to sell it back anymore. The risk here is that not all coins are created equal, and no one can guarantee the future of any crypto and its ability to become a full-fledged currency. This is especially true with all the new Central Bank Digital Currencies (CBDC) that many governments around the world are developing.

HODLING as a Strategy and Guiding Philosophy

U.S. Treasuries (“T-Bill”) investing services on the Public Platform are offered by Jiko Securities, Inc. (“JSI”), a registered broker-dealer and member of FINRA & SIPC. When you enable T-Bill investing on the Public platform, you open a separate brokerage account with JSI (the “Treasury Account”). SPEDN encourages people to use cryptocurrencies in the real world to buy goods and services, or simply to pay their bills with crypto.

Crypto Tax Australia 2023: Capital Gains on Trades – Cointree

Premium users get access to guidance from expert analysts, as well as data from Morningstar’s industry-leading reports. When deciding whether to HODL, consider your own investment strategy and goals, as well as your risk tolerance. Bitcoin investors were taking to forums like Bitcointalk to share their fears and encourage each other to stay the course.

This material is not intended as a recommendation, offer, or solicitation to purchase or sell securities, open a brokerage account, or engage in any investment strategy. “HODL” originated as a misspelling of “HOLD” (written in all caps), in an online post by an early Bitcoin investor. But “HODL”, as it has gained popularity among crypto enthusiasts, has come to mean “hold on for dear life”. Crypto HODLers, like buy-and-hold stock investors, pride themselves on “holding on” by not selling their cryptocurrency, no matter what happens in the crypto markets. In contrast, other investors choose to time the market, which leads them to make short-term decisions or trades. Compared to buying and holding, market timing needs a lot more skills and expertise, meaning beginners have a disadvantage with this strategy as opposed to value investment.

HODL: The Cryptocurrency Strategy of “Hold on for Dear Life” Explained

HODL has since become a strategy used by people who admit they do not have the skills to do short-term trades – such as scalping, day trading, or swing trading. The term HODL has also inspired the creation of a similar term often, BUIDL, which is commonly used by the cryptocurrency community to refer to the many kinds of applications that are being built within the blockchain industry. Even though the word started out as a meme, it has become widely accepted in investing jargon as a word for holding cryptocurrencies with so-called diamond hands, a refusal to sell no matter what happens to prices. Cryptocurrencies are considered to be highly volatile assets, and it’s not unusual to see daily price changes of 20+% in either direction.

The history of HODL

Reference to any specific strategy, technique, product, service, or entity does not constitute an endorsement or recommendation by dYdX Trading Inc., or any affiliate, agent, or representative thereof (“dYdX”). DYdX makes no representation, assurance or guarantee as to the accuracy, completeness, timeliness, suitability, or validity of any information in this Article or any third-party website that may be linked to it. 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. Just as with stocks, bonds, mutual funds, and ETFs, investing in crypto is risky. The price of digital assets fluctuates significantly, so it’s important to pay attention to the market and do your research before investing.

What is the difference between HODL and a buy-and-hold strategy?

This is important as it can help spur adoption of crypto as a payment method. Meanwhile, BUIDL encourages people to roll up their sleeves and build decentralised applications, platforms and tools that improve the crypto ecosystem. The term HODL began as an accidental (beverage induced) misspelling of ‘hold’. He is also a staff writer at Benzinga, where he has reported on breaking financial market news and analyst commentary related to popular stocks since 2014. Mr. Duggan is also the author of the book “Beating Wall Street With Common Sense” and has contributed news and analysis to U.S.