While HODL originated on crypto forums, it’s similar to the buy-and-hold strategy that has been popular with stock market investors for decades. This strategy has been particularly helpful for traders looking to invest in a bear market or wait out short-term downturns.
It’s essential to consider cryptocurrency volatility when making investment decisions. 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.
In this blog, we will explore what HODL is, the history, pros and cons of the HODL to help you determine if it can be the right move for your investment journey.
HODL is a misspelling of hold that is commonly used on crypto forums. More recently, it has become an acronym for hold on for dear life.
The HODL strategy is a long-term approach that involves holding onto an asset regardless of market performance. The hope is that, over several years, the market will trend upward, creating a return on your investment.
HODLing crypto isn’t a proven strategy and comes with a host of risks. In deciding whether HODLing is right for them, traders should consider other strategies like SPEDN or BUIDL.
What does HODL mean?
If you‘ve spent time on crypto forums, you may have seen the term HODL. But what does HODL stand for?
HODL stands for “Hold On for Dear Life” and is a strategy where investors hold onto their cryptocurrency investments despite price fluctuations. HODL is an investment strategy that involves buying an asset, typically cryptocurrency, with the intention of holding onto it for the long term, regardless of market volatility. It reflects the idea of weathering market fluctuations without selling.
Although HODL emerged from the cryptocurrency world, it is similar to the traditional buy-and-hold strategy used in the stock market for decades. This approach encourages investors to ride out short-term downturns with the expectation that markets will eventually recover, leading to long-term gains.
It’s important to remember that while HODLing has worked well in traditional stock markets, the extreme volatility of cryptocurrencies adds more uncertainty. While crypto forums advocate for HODLing, there isn’t conclusive evidence that it guarantees the same success in crypto as it has in stocks.
In fact, if you invest in stocks, you may already be a HODLer. Thats because, in the stock market, HODLing is more commonly referred to as the buy-and-hold strategy. This approach starts with the expectation that the stock market may continue trending upward over time. It assumes you can make long-term gains by holding out through short-term fluctuations in the market.
The history of HODL
In 2013, the bitcoin market was in the middle of a massive dip. Bitcoin investors were taking to forums like Bitcointalk to share their fears and encourage each other to stay the course.
After drinking a few glasses of whiskey, a user named GameKyuubi decided to post about his frustrating lack of trading skills. Instead of trying to spot fluctuations in the market, he had decided to just hold out for the long haul. Sitting in front of his computer, he drunkenly slammed out the now-infamous line: I AM HODLING.
The misspelling set off a frenzy in the online world of crypto investors, and the term quickly became a meme. In no time, HODL became a mainstream investing term. The acronym Hold On for Dear Life followed shortly after. Crypto traders began to encourage each other to HODL or hold their investments even when the market was volatile.
Pros and cons of the HODL strategy
Is HODLing the right approach for you? Trading digital currency is risky and the price can fluctuate significantly. On the other hand, the buy-and-hold strategy is widely considered to be a sound investing approach.
When deciding whether to HODL, consider your own investment strategy and goals, as well as your risk tolerance.
Pros of HODLing
It doesn‘t rely on market timing:
The HODL strategy is about holding assets over the long term, which means that cryptocurrency investors don‘t have to be concerned about timing the market. 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.
It‘s a hands-off investment strategy
When you buy and hold, you don‘t have to worry about market volatility or watch for every movement in the market to time your sales.
It can help you build discipline as an investor
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.
Cons of HODLing
It doesn‘t have a track record
Crypto is still relatively new, so we can‘t look back over time and see how the HODL strategy has performed. Although buy-and-hold may be an effective approach when it comes to investing in stocks, we still don‘t know if it works for digital assets.
It ties up cash that could be invested elsewhere
When you HODL, you give up the chance to invest that money in a diversified portfolio of stocks, bonds, exchange–traded funds (ETFs), and mutual funds. That means that you‘re missing an opportunity for potential gains in those markets.
It involves investing in a risky asset
New investors often ask:is cryptocurrency safe? Crypto is a highly unstable asset whose value fluctuates significantly. HODLing can help you wait out those fluctuations, but there‘s no guarantee that the asset will increase in value.
Can you HODL stocks?
Yes, you can! Although the term HODL originated in the crypto community, stock market investors have been HODLing for a long time. You can HODL any stock you own, but it‘s usually best to avoid HODLing risky stocks. Instead, consider focusing on blue-chip investments.
There are a host of stock market myths out there and just like any other investment, including crypto, the stock market also goes through bull and bear periods. HODLing stocks can help investors avoid the instinct to pull out when the market is in decline. By holding stocks for the long term, investors can weather short-term market instability.
What is the difference between HODL and a buy-and-hold strategy?
The two terms refer to the same approach. 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.
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.
When to use HODL strategy?
When the markets are unstable, HODLing can be a strategy to consider. While it‘s still unclear if HODLing will pay off for crypto investments, it‘s historically been a go–to approach for stock traders who want to invest in a bear market.
The goal of HODLing is to wait out recessions and other dips in the market, with the goal of cashing out when the market improves. HODLing requires a long time horizon, so it‘s usually best for investors that don’t need access to their cash for a long time. If you‘re looking to cash out quickly, HODLing may not be the right approach for you.
Many newer investors will start out HODLing by using a dollar cost-average strategy. This means that you buy a set amount every day, week, or month, which allows you to buy in at the average price throughout your investment period.
Public recurring investing feature can help you use this strategy by automating your crypto investments.
Just as with stocks, bonds, mutual funds, and ETFs, investing in crypto can be risky. The price of digital assets fluctuates significantly, so it‘s important to pay attention to the market and do your research before investing.
Some investors may choose to invest in ETFs, like bitcoin ETFs, that use futures contracts vs investing directly in a digital currency in an attempt to track a digital asset’s performance ETFs let you buy into a fund that attempts to track the performance of a digital currency over time, instead of investing directly.
Alternatives to HODLing
HODLing isn’t the only investing strategy. Some crypto traders choose to use other approaches, like SPEDN or BUIDL. While the misspelled terms are send-offs of HODL, these strategies are completely different in their approach.
Both SPEDN and BUIDL involve using crypto instead of holding it. Traders who use the SPEDN strategy believe in spending cryptocurrency in order to encourage real-world adoption. This approach believes that popularizing digital currencies can help raise their value.
While the SPEDN strategy involves buying real-world goods with cryptocurrencies, BUIDL traders use their crypto to build blockchain applications. The idea behind this strategy is to encourage users to contribute to the development of cryptocurrency infrastructure, which will ideally raise the value of digital currencies.
If you‘re looking for ways to shape your investing strategy, Public Premium features can help. Premium users get access to guidance from expert analysts, as well as data from Morningstar‘s industry-leading reports.
Is HODLing for you?
There are no definitive rules for buying and selling crypto. 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.
You may already be HODLing. Stock market investors often use the buy-and-hold approach for long-term investments, which is effectively the same as HODLing.
Even if HODLing doesn‘t seem right to you, there are still lessons to be learned from this approach. HODLers are a social bunch, their strategy relies on support from other investors, who urge them along and convince them not to sell if they are feeling unsure.
Publics social investing platform gives you access to a knowledgable and diverse community of fellow investors. By sharing insights and updates on market activity with each other, Publics users can stay on top of the market and build confidence in their investing strategies.
Make your first step towards investing with Public.com
Public social investing platform gives you access to a knowledgeable and diverse community of fellow investors. By sharing insights and updates on market activity with each other, Public users can stay on top of the market and build confidence in their investing strategies.
To learn more and take the first step toward investing, Sign up on the Public.com today and join a community of informed investors!
Frequently asked questions
What does FUD mean?
FUD stands for fear, uncertainty, and doubt. It’s a feeling many crypto investors have during a downturn. Oftentimes, other investors will suggest HODLing as a solution to FUD.
What does HODL stand for?
HODL is a misspelling of hold and an acronym for hold on for dear life.
What does HODL mean?
The HODL strategy, also known as buy-and-hold, involves buying an asset and holding onto it, even if the market becomes unstable. HODLing is based on the idea that, historically speaking, the market will ultimately trend upward.
Is it good to HODL?
Depending on your investment strategy and risk profile, HODLing can be a good approach. However, crypto markets are highly unstable and there is no guarantee that HODLing will be successful.
What is the HODL meme?
The HODL meme started as a post by a user on the Bitcointalk forum. The post, which expressed frustration over his inability to play the markets, started with the infamous line I AM HODLING.
How do you say HODL?
Since the term originated on the internet, there’s no single correct pronunciation. Some people say HODL like hold, while others say ha Dell or Hod Dell.
