HODL: What Does It Mean and Where Does It Come From?

They’re holding for the long-term and looking to build life-changing wealth. You only sell in a bear market if you are a good day trader or an illusioned noob. In a zero-sum game such as this, traders can only take your money if you sell. Bitcoin has only been around since 2009, giving it a limited long-term track record compared with stocks, bonds, real estate and other assets. Others have argued that the stubbornness and close-mindedness of HODL culture is “cult-like,” blinding the community to any legitimate criticisms of Bitcoin as an investment or a currency. There’s no question the HODL strategy has paid off well for GameKyuubi and other Bitcoin investors that have held onto their crypto investments.

• We’re also a community of traders that support each other on our daily trading journey.
• Likewise, when a stock or crypto price is at its highest, investors often feel excited and overconfident, prompting them to buy at the worst possible time.
• It is worth noting that there could be some differences between a HODL strategy and the traditional buy-and-hold investing strategy.
• It is, however, more difficult to engage in market timing strategies in crypto where price volatility is high.

It is a rallying cry by the blockchain community encouraging the weak hands to hold on to their positions whenever the price rises to stratospheric heights or starts plummeting down to earth. Lamborghini supercars have, for a long time, been used as status symbols by wealthy crypto investors, especially those that can attribute a bulk of their wealth to blockchain-related activities. For instance, if the asset is in the middle of a bear market, there will be fewer buyers than there are sellers. For big investors, a falling market might not offer the right conditions to sell. They have to wait for buyers to come in to absorb their large orders.

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With cryptocurrency, Morrison says, the importance of patience is even higher. The volatility is more extreme, but the long-term gains have been quite appealing. A marketplace for cryptocurrencies where users can buy and sell coins.

• Hodling sounds a lot like the long-term buy-and-hold strategy The Motley Fool employs in the stock market.
• However, “hodling” can provide more safety to investors, as investors are not exposed to short-term volatility and can avoid the risk of buying high but selling low.
• Based on these principles, the best time to HODL is now, always, and forever.
• Low cap coins are ideal for pump and dump schemes since instigators do not need to make huge investments to achieve the desired price action.
• Unfavorable policy-making and public perspective might drag down the asset value for the long term.

Under the post-COVID low-interest context with inflation expectation, investors also hold cryptocurrencies for value reserve. The term ‘HODL’ originated from a post in a Bitcoin forum, where the user accidentally typed ‘hodl’ instead of ‘hold’ during a discussion about trading strategies. The user referred to themselves as an ‘illusioned noob’ who was poor at trading, thus choosing to ‘hodl’ during a period of high price volatility. Yes, the principle of HODLing can also be applied to the stock market. It’s similar to the buy-and-hold strategies used by many stock market investors. The idea is to purchase stocks and hold onto them for a long period, regardless of market fluctuations.

What Does It Mean to HODL?

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• And there are psychological biases that negatively impact investors’ decision-making.

As the project rises in popularity and utility, the value of the project’s token also rises. Continue reading to learn more about how it came to be, why it is considered an investment strategy, and other words that you may want to be acquainted with if you wish to be a part of the community. The first step for a beginner in the blockchain ecosystem is to find out where all the important conversations happen, including social media platforms and chat forums. Next, you should learn the terminology, and part of that is identifying the unique terms and phrases used by members of the community, what they mean and how to use them effectively. If a «whale» sells a lot of their stake, it can cause the price of a cryptocurrency to dip by flooding supply, he explains.

The History of the Term ‘HODL’

The utility of HODLing, like any investment strategy, has its limits. Even a long-term cryptocurrency investor would be well-served to articulate clear goals and to monitor the emerging space for systemic risks. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer https://hexn.io/ advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. There is no difference between HODLing a cryptocurrency and a buy-and-hold strategy. You can HODL a stock through its volatility because you believe in the company’s future success.

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• Indeed, the original HODLer in 2013 had no illusions about their ability to play the market.
• “HODL,” one of the most frequently used terms in the cryptocurrency world, originated years ago from a typo.
• “FUD,” “to the moon,” “DYOR”—there are so many industry-specific colloquialisms that newbies to the market could benefit from a crypto-specific dictionary.

It can be difficult for even professional traders to time short-term trades. And there are psychological biases that negatively impact investors’ decision-making. The meme also acknowledges novice crypto investors that they are not skilled enough to profit from short-term trades amid the notoriously volatile crypto market. But in general, the idea of investing for long-term, rather than short-term, gains is not a new one. I’LL TELL YOU WHY,” their message read (this time spelling “hold” correctly).

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That’s good news because it’s not easy to do this, even under the best circumstances. Timing the market requires expertise and a talent for predicting shifts in the market that most regular traders don’t possess. HODL is a misspelling of “hold” and an acronym for “hold on for dear life.” It refers to an investing strategy where you buy crypto with the goal of holding onto it for the long haul, regardless of market conditions. Crypto markets are highly volatile, which means that investors often find themselves second-guessing their decisions. In the short term, if you’re advised to hold, it suggests just hanging tight as all is probably good, so there’s no reason to sell up but it’s also not worth buying loads more just in case things go tits up. If you see the value dipping or surging before your eyes, it can be easy to think that you need to buy more or sell the fucking lot, but you can just breathe…and hold…and hope it all steadies out in your favour.

• Even a long-term cryptocurrency investor would be well-served to articulate clear goals and to monitor the emerging space for systemic risks.
• The crypto market crashes that happened in 2018 and 2020 are perfect case studies that support the HODL investing strategy.
• HODLing becomes an ideological belief about the long-term prospects of blockchain technology, cryptocurrencies, and the communities that have formed around them.
• On December 18, 2013, Bitcointalk user GameKyuubi uttered the phrase “I AM HODLING” as part of a rant against the difficulty and even futility of trading cryptocurrency.

HODL helps connect people in the Web3 ecosystem and encourages the crypto community to focus on the positive aspects of blockchain technology. The HODL memes bring levity to stressful situations, and the phrase inspires fellow investors to stay strong when markets decline. All in all, the shared struggles and triumphs of HODLing create a sense of camaraderie among crypto traders. When the markets are unstable, HODLing can be a strategy to consider.

Can you HODL in the stock market?

The HODL approach has been rewarding for long-term investors in Bitcoin, Ethereum (ETH) and other leading cryptocurrencies, as it’s helped them navigate extreme fluctuations in the crypto market. In no time, the term HODL spread like wildfire throughout the crypto world. Today, it refers to investors who refuse to sell their crypto regardless of how high or low prices trade. If you invested $1,000 in Bitcoin on the day of the original HODL post, it would be worth much more today. But there are countless people who have lost money trading Bitcoin in the meantime, buying it when it was high and bailing out after a disappointing fall.

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Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The fall was possibly a result of a ban of third-party payment companies from working with Bitcoin exchanges from China’s central bank (People’s Bank of China). The author loaded the post with typos and upper cases to express his firmness in his simple holding strategy. This Article does not offer the purchase or sale of any financial instruments or related services.

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

Therefore, traders interested in crypto need to carefully understand what they’re investing in with crypto. The legendary volatility of cryptocurrency is due to the fact that it’s driven entirely by sentiment, since no hard assets or cash flow back cryptocurrencies (with the exception of stablecoins). Many crypto coins, maybe even most of the 10,000 or so in existence, may end up worthless. It’s worth noting that ‘market timing’ — the act of trying to predict future price movements — is notoriously difficult and risky, even for seasoned investors. Satoshi Nakamoto, the creator of Bitcoin, designed it as a medium of exchange and a store of value, suggesting a long-term use case. Therefore, many investors view any time as a good time to HODL as long as it aligns with their personal investment strategies and risk tolerance.

Cons of HODLing

When a stock or crypto’s price is at its lowest point, investors typically experience fear, anger and panic that can lead them to sell at the worst possible time. Likewise, when a stock or crypto price is at its highest, investors often feel excited and overconfident, prompting them to buy at the worst possible time. GameKyuubi explained in the post that he planned to “hold” his Bitcoin (BTC) investments because he knew he was a bad trader. You don’t have to be a cryptocurrency disciple to learn something from the HODLers. If you believe in the value of your investments, you might be less likely to panic in the face of market turmoil. HODL may also refer to a DeFI token on the Binance Smart Chain (BSC).

Crypto forums may preach the benefits of HODLing, but there isn’t definitive proof that it works for crypto investments in the same way it has traditionally worked for the stock market. Crypto investors quickly retrofit HODL as an acronym for “hold on for dear life,” an encouragement to other crypto investors not to sell when prices fall. The term originated from a 2013 online post to the Bitcointalk forum where the typo appeared. The price of Bitcoin in 2013 was volatile at the time, surging to over $950 at the beginning of December, 2013, up from just over $130 in April of the same year. The poster encouraged people not to sell and that they were «hodling» [sic]. HODLing is a sound investment strategy that has been successfully applied even within the traditional markets; however, its efficacy depends on the investor’s goals.

The HODL token operates using the Binance Smart Chain, and HODL token owners can earn Binance Coin rewards. At the same time, Bitcoiners use HODL as a form of encouragement during crypto winters, literally reminding each other to HODL onto their bags. There are several more words that we did not cover in this guide but we are sure you will run into as you interact with other community members. Be observant, keen, and keep an open mind when interacting with other enthusiasts in chat forums and on social media.

Your decision: Is HODL for you?

Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. HODL means holding on to an investment position no matter how volatile the price action gets.

HODLing is often seen as a simple and effective strategy, especially for those who prefer to avoid the stress of daily trading. It’s based on the belief that over time, the value of cryptocurrencies will increase despite short-term price swings, a view held by many crypto traders. The term HODL was born from a post titled ‘I AM HODLING,’ made by a member named GameKyuubi, on the famous Bitcoin forum Bitcointalk in December 2013.

What Is HODLING?

But investors who were spooked into selling their BTC in past downturns have lived to regret those decisions. Crypto pump and dump is an investment scheme in which instigators buy large positions in low-cap (market capitalization) coins or tokens before shilling these assets to other investors. The intention is to create an artificial price increase leading to a substantial profit.