HODL is one of the most common terms that you will come across in the crypto industry. This term is popular among investors and that is because it is related to the traditional investment strategy– buy-and-hold as a way to cope with market volatility. For beginners, HODL is one of the insider terms called crypto lingo, and knowing what it means is crucial if you are learning the secret of the trades.
This article will teach you everything you need to know about HODL-ing in crypto and how you can use this strategy to be a successful crypto trader.
What is HODL-ing in Crypto?
HODL is a term that is actually derived from a purposive misspelling of ‘Hold’ and it is used in the context when one is buying and holding a cryptocurrency. HODL is now commonly known as an acronym for ‘Hold On for Dear Life’ meaning that investors are planning to hold on to their assets to get through market instability.
This term is used by investors who are refusing to sell their crypto despite the high or low prices. It can be mostly found during a bear market where people refuse to sell, especially when the prices are low, hoping it will make a major recovery in the future.
Generally, the goal here is to weather through the market ups and downs and reach your long-term goals. This means you need to have the stomach for it even if the market becomes bumpy. This is why this tactic is common among value investors.
When to HODL?
So when is the right time to HODL? Deciding when to hold or sell your crypto is a personal choice, but if you want to be an experienced trader, you must do your research and due diligence before HODL-ing. Many investors use the HODL strategy to improve their portfolio, meaning they only buy crypto but don’t sell it for many months or years.
Some people also choose to HODL coins while actively trading other coins in the market. The coins that they actively trade do not have much potential for growth. The coins that are in HODL are those that are more established and stable. This means that those types of coins are most likely to increase in value over time.
Why You Should HODL
A long-term buy-and-hold approach has been proven to return the initial investments of traders and some profit. Just like many crypto investors, building and maintaining an impressive portfolio can serve your advantage.
Here are some reasons why HODL-ing might be for you:
No Capital Gains
When you do HODL, you can avoid realizing the capital gains of your initial investments– meaning that you will be able to continue deferring taxes while your investment increases. Many crypto investors are worried about the taxes so this is a more favorable strategy for many.
Less Time Investing
Compared to day trading, HODL does not require you to keep an eye on the charts and the market all day. Since you know you are investing for the long term, you won’t be easily fazed by the daily trends. You can also spend more time doing more things you love instead of spending all your time analyzing the data.
An Upside Is Always Present
The HODL strategy is great for long-term investments since there is a bigger room for the prices to go higher; it simply means that you don’t always feel like you are running out of time. Regardless of the kind of crypto asset that you hold, you can always ride the volatility and wait for the value recovery.
Change in Mindset
When you do a HODL on an asset, you will start seeing price declines as a great opportunity for you to buy. Instead of worrying about the market prices going down, you will change your mindset and see them as a good thing for your long-term goals.
FAQs
Here are some frequently asked questions about HODL in cryptocurrency:
How long should I HODL in crypto?
Essentially, when you decide to HODL in crypto, it means that you plan to hold on to your assets for a long time. Most markets in crypto have a four-year cycle and those investors who are HODL-ing are aware of this. The ideal time to HODL is between 3-5 years for most people.
Is it better to HODL or trade immediately?
Between the two options, experts advise beginners in crypto to HODL. It is considered the better strategy especially when you are not yet 100% sure if your trade will give you the most profit now. The cryptocurrency market value usually recovers after a few years and will most likely increase, so HODL is the better option if you are in it for the long term.
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