HODL: what does it mean?
HODL – a long-term strategy for investing in cryptocurrencies
What does the word HODL mean and where did it come from?
The word “HODL” comes from a post on the Bitcoin Forum, a platform where investors can share their views on Bitcoin and the economy. On December 18, 2013, a forum member with the nickname “GameKyuubi” wrote a post with the title “I HODLING” because “HODLING” is a misspelling of the word “HOLDING”.
2013 was an important year for Bitcoin. The price rose from $15 in January of said year to over $1,100 in early December, generating a return of 7230%. Due to high volatility, the price fell from $716 at 39% to $438 in mid-December.
What strategy does HODL belong to?
“Hodling” refers to a buy-and-hold strategy. Buy-and-hold type investors tend to hold their assets for long periods of time to profit from long-term appreciation. In contrast, traders are much more active in trades and seek profits by buying at low prices and selling at high prices.
Because of their high volatility, cryptocurrencies provide excellent opportunities for traders to frequently build up long and short positions. However, “hovering” can provide greater security for investors because investors are not exposed to short-term volatility and can avoid the risk of buying at a high price and selling at a low price.
An asset’s past performance is no guarantee of its future success. There is no way to be sure of its price direction in the future. Long-term holding allows for astounding results over distance
Below is a chart of Bitcoin Profitable Days
The number of days in Bitcoin trading history when BTC holding has been profitable compared to today’s price.
This chart highlights the aggressive growth of Bitcoin’s acceptance curve over time, which is reflected in its price. Because supply is limited, the price moves upward as demand increases.
For investors, it also demonstrates the importance of understanding Bitcoin’s market cycles to avoid buying market cycle tops. Drawdowns from cycle tops can last a long time, about 2-3 years in previous cycles.
What should you always remember?
Despite the recent high returns and reasons to invest, as mentioned above, prudent investors should also consider the risks of owning cryptocurrencies. Cryptocurrency prices are highly volatile. Investors may have to experience extreme ups and downs in the value of their assets, which means that they must have a much higher risk appetite than investors using conventional investment instruments. They must have sufficient capital to avoid forced selling or to meet unforeseen liquidity needs.
A great example is those people who have kept their investments with bitcoins in 2018. This means that HODLing has led them to amazing investment results. Not to mention early investors in cryptocurrencies
The figure below shows that as losses increase, the return from recovery to breakeven increases much faster. If you’ve been hit by a bear market or a big drop, you need to know that it will take time to recover.
“The key to success in trading is emotional discipline. If intelligence were the key, there would be many more people making money trading.”Victor Sperandeo
What advice can we give you?
- You should not take buy or sell orders on emotions, if you think about your position often, about losses, it means that your investment amount is too large for you and yours is not comfortable for your psyche;
- Do not invest a significant amount of money for you in risky assets, and then you will feel much more comfortable in the moment of strong drawdowns;
- Always keep a margin of cash for investment in classic currencies, remember that being in the dollar/euro is also a position;
- When you have the cach for future transactions, a strong drop in the market, for you this is an opportunity, an opportunity to start to form an investment portfolio for long-term investments at an interesting price. But you must remember that after the first bottom of the price, there may be a second and third, so you should not buy all your cash at once, you have to split the amount for investment, and to buy in parts;
- Be careful in the markets and do not trade on emotions, holding is a great trading strategy, especially for non-professional market participants.
In our company, we have selected good products for long-term trading – investment portfolios
Everyone will find a portfolio that meets his vision of the market, new trends on the cryptocurrency markets and different market sectors.
If you have difficulties in making a choice, we can recommend our flagship portfolio Ecos Ventures Index for purchase.