HODL

A type of passive investment strategy where you hold an investment for a long period of time, regardless of any changes in the price or markets. The term first became famous due to a typo mad

What Is HODL?

HODL is an acronym that stands for “hold on for dear life.” It is a popular meme among crypto investors and a play-on-words on the word “hold.” The term refers to an investment strategy of buying cryptocurrency with the intent of never selling it.

What Does HODL Mean?

HODL is a meme expression for the intent to buy a cryptocurrency and never sell it. The goal of this strategy is to ride out the volatility of crypto investment and eventually benefit from a long-term appreciation of the purchased coin. Although there is no guarantee of price appreciation, cryptocurrency investors adamantly believe that holding a coin long enough will eventually lead to positive returns. In past, this has been particularly true for Bitcoin and Ethereum investments.

HODL also refers to staying calm during periods of increased emotionality in the markets, also known as FUD. Those who HODL during these periods of increased uncertainty presumably weather the FUD and eventually get rewarded in the form of positive returns on their investment.

The Origin of HODL

HODL is a misspelling of the word “hold” and later acquired the meaning “holding on for dear life.” The origin story of the term can be traced back to the Bitcointalk forum. In the bull run of 2013, Bitcoin rose from $15 in January 2013 to a high of $1,100 in December 2013. On December 18, 2013, the price of Bitcoin fell by 39% from $716 to $438.

A trader called GameKyuubi posted on the Bitcointalk forum “I AM HODLING,” in an attempt to convince others to do the same and not sell in the face of market volatility. His rant continued:

“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 … Just like that and make a millino bucks sure no problem bro.”

This outburst of emotion hit a nerve with other traders that were trying to navigate the volatility of Bitcoin. Eventually, the meme caught on and others followed his example to HODL their coins and never sell in order to outlast market volatility. When the meaning “hold on for dear life” was attached to the term is unclear.

Understanding the HODL Strategy

The HODL investment strategy ultimately comes down to having extreme conviction in an investment and being committed to not selling no matter how bad a drawdown it experiences. Thus, HODL strategies can be applied to any investment but are best known for referring to cryptocurrencies, and especially Bitcoin. In the HODL strategy, investors must refrain from panic selling when the market is undergoing extreme volatility or extended bear markets.

Although the HODL strategy has been profitable for traders that bought in at low prices of Bitcoin, there is no guarantee that it will ultimately be profitable. At the time of writing, in November 2022, investors that bought Bitcoin in December 2017 would be in a loss, despite having been in profit for a long time during their investment. Therefore, we can conclude that HODL is a multi-year or even multi-decade investment strategy with the assumption that Bitcoin will eventually be adopted as a store of value by a majority of investors.

HODL in the Media

HODL has become a viral meme in the cryptocurrency industry and has achieved mainstream popularity. Different mainstream media outlets, like The Washington Post and CNBC, have covered the meaning of HODL and the underlying investment strategy of crypto maximalists. It is also often combined with other memes in the crypto industry, particularly in the Bitcoin community.

Alternatives to HODLing

The opposite of HODL would be day trading, where investors try to profit from market fluctuations to buy and sell assets in a short time frame, such as minutes, hours or weeks. HODL can thus be seen as an investment strategy, while day trading refers to a trading strategy that does not concern itself with holding a cryptocurrency for long.

There are some derivatives of the term HODL. For example, some crypto insiders coined the term BUIDL, which presumably stands for “build (on for dear life).” A BUIDL strategy does not refer to investing in cryptocurrencies but concerns itself with building on top of blockchain technology. Many Ethereum fans and developers swear by a BUIDL strategy, as they strive for building out Ethereum in the purported “future of finance.” HODL, on the other hand, is a meme more commonly referred to in the Bitcoin community, although it has been adopted by other cryptocurrencies as well.

In conclusion, HODL is one of the central memes in the crypto industry and forms a part of the tribal identity of crypto investors, who believe that crypto will one day replace or at least rival fiat currencies.

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