31 January 2022

HODLing in Cryptocurrency and Stocks: What Investors Need to Know

HODL is a term commonly used by cryptocurrency investors who refuse to sell their cryptocurrency regardless of the price increasing or decreasing. It is more frequently used during a bear market when people refuse to sell their coins despite the price drop.

HODL was derived from a misspelling of "hold," in the context of buying and holding Bitcoin and other cryptocurrencies. HODL was later retrofitted to be an acronym (backronym) for “Hold On for Dear Life” and refers to not selling, even during strong market volatility and poor market performance.

Origin of HODL

The term HODL (or hodl) originated as a spelling mistake in 2013 with a post to the Bitcointalk forum. The price of Bitcoin in 2013 was volatile, surging to over $1,100 at the beginning of December, 2013, up from just over $100 in April of the same year.

In the original BitcoinTalk thread at 10:03 a.m. UTC on Dec. 18, Bitcointalk forum user GameKyuubi posted "I AM HODLING"—a drunk, semi-coherent, typo-laden rant about his poor trading skills and determination to simply hold his Bitcoin from that point on. GameKyuubi wrote:
"I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. GF's out at a lesbian bar, 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. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro."
GameKyuubi had concluded that the best course was to hold, since:
"You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell."
He then confessed he'd had some whiskey and briefly mused about the spelling of whisk(e)y.

Within an hour, "HODL" had become a meme, and there are now countless HODL memes floating around the internet. 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.

HODL as an Investment Strategy and Philosophy

HODL, as an acronym for "hold on for dear life," has become a mantra among crypto enthusiasts denoting a long-term approach to cryptocurrency investing. This approach mirrors GameKyuubi's rationale in the original post that novice traders are likely to botch their attempts to time the market, and should simply hold their coin.

For cryptocurrency maximalists, HODL represents more than a strategy for reigning in FOMO (Fear of Missing Out), FUD (Fear, Uncertainty, and Doubt), and other profit-eroding emotions. Long-term crypto HODLers stay invested because they believe that cryptocurrencies will eventually replace government-issued fiat currencies as the basis of all economic structures. Should that occur, then the exchange rates between cryptocurrencies and fiat money would become irrelevant to crypto holders.

Predictably, a meme best captures this HODL maximalist philosophy. Neo from The Matrix asks Morpheus, "What are you trying to tell me, that I can trade my Bitcoin for millions someday?" Morpheus responds, "No Neo, I'm trying to tell you that when you're ready … you won't have to."

Can You HODL Stocks?

While HODLing is generally associated with cryptocurrency investors, the buy-and-hold investing strategy that it represents is not limited to crypto investing.

Many stock investors "HODL" their investments for long periods of time, although stock prices are almost always less volatile than the prices of crypto assets. Investors in stocks who buy and hold can benefit from long-term price appreciation while experiencing much less price volatility than is associated with cryptocurrencies.

HODL Frequently Asked Questions

What does it mean to HODL?

"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.

What is the HODL coin?

HODL ($HODL) is a cryptocurrency that was named based on the popularity of "HODL" as an expression in the crypto community. The HODL token operates using the Binance Smart Chain, and HODL token owners can earn Binance Coin rewards.

Who said HODL?

The true identity is unknown of the person who inadvertently coined the term "HODL". The original misspelling of the word occurred in a post by the user "GameKyuubi" on the Bitcointalk.org online forum, at 10:03 a.m. UTC on Dec. 18, 2013.

Key Takeaways and Learning

Key Takeaways:
  • HODL originated in 2013 as a spelling mistake of the word "hold" after GameKyuub, an unknown user on the Bitcointalk forum, had had some whiskey.
  • The prices of Bitcoin and other cryptocurrencies are notoriously volatile, but HODLers disregard even large price swings. They simply HODL.
  • The HODLing investment strategy is not limited to crypto alone, investors in stocks also buy and hold their stock assets for long periods of time for price appreciation.
Risk Reminder: Trading stocks, derivatives, cryptocurrency, foreign exchange and/or contracts for differences on margin, or other negotiable securities carry some level of risk and may not be suitable for all investors. The possibility exists that you could sustain a loss in excess of your deposited funds. Before deciding to trade the products discussed on this page, you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading and investing. SaibaWorld provides general advice that does not consider your objectives, financial situation or needs. The content of this Website must not be construed as personal advice or financial advise. If you have no or low appetite for risk, SaibaWorld recommends you seek advice from a financial advisor. See site disclaimer.

The above article is reproduced from an original on investopedia.

No comments:

Post a Comment