HODL is one of the popular acronyms/slang in the world of cryptocurrency. If you must be involved in a crypto investment you’ll need to ”hold on for your dear life”.
If you see and pronounce ”HODL” as ”HOLD” then you are on the right track to keep hold of your cryptocurrency. The term is misspelled to have it as a word that becomes useful for crypto enthusiasts.
In this post, we’ll understand what the term HODL means and its implication in the world of crypto. For the sake of beginners, let’s know what cryptocurrency is all about.
What is Cryptocurrency?
Cryptocurrency is a digitally encrypted, decentralized currency that is not linked to or regulated by any government or central bank.
It is based on blockchain technology, which is a distributed ledger framework. Blockchain is a distributed ledger that is managed by a network of computers. It maintains an exact copy of the database and updates its records by consensus based on pure mathematics.
Bitcoin is the first cryptocurrency created which has led to the creation of others alike known as altcoins. Examples of these cryptocurrencies include Ethereum, Dogecoin, Ripple, Cardano, etc.
Cryptos are categorized as virtual or digital currencies. They were originally developed to provide an alternative mode of payment for online transactions.
Today, there are over twenty thousand crypto-assets according to CoinMarketCap.
What Does HODL Mean?
HODL is a term derived from a misspelling of “hold” in the context of buying and holding Bitcoin and other altcoins. The acronym, HODL means ”hold on for dear life” and has become a strategy in crypto investment.
Crypto beginners need to understand that they can hold on to their tokens rather than panicking to sell when crypto is down. The term HODL came to be in 2013 when a post was made in a Bitcoin forum by someone with the handle GameKyuubi.
He had made a post in regards to the sudden price fall of BTC after it had surged from $15 to $1000 that year. GameKyuubi’s post had a lot of typos and upper cases which made him write ”I am Holding” as ”I am Hodling”. This soon became viral and an internet meme.
Hodl became an industry term that investors use to refer to buy-and-holding assets for a longer time horizon rather than making frequent trades.
What is the HODL Strategy?
The Hodl strategy comes from GameKyuubi’s original post where he advised that it is best to hold on to coins rather than timing the market. Crypto beginners and investors can use this strategy for fear of missing out.
Long-term holders believe that cryptocurrencies will eventually replace fiat currencies. Holding a coin on a long-term basis helps them to skip the pain of the bear market while anticipating the next big move.
Based on these principles, the best time to HODL is now, always, and forever. A true believer would always hold on to their tokens, even if markets crash or become extremely volatile.
Risk Associated with HODL in Cryptocurrency
Despite the benefits of this investment strategy, it is not without risk. The prices of cryptocurrencies are very volatile. Investors may have to experience extreme ups and downs in their asset values.
For this reason, holders must have much larger risk appetites than other forms of investors. They must have sufficient capital capacity to avoid forced sales or meet unexpected liquidity needs.
Another huge risk is that the future of cryptocurrency is uncertain. Many nations of the world are yet to accept it for their citizens despite its mass adoption lately. Holding a token for the long-term might be the greatest loss if the asset value is dragged down or if no longer in existence.
HODL is a term in cryptocurrency that investors and traders need to know just like FOMO, FUD, and so on. Hodl, a misspelled word is an investment strategy to hold cryptocurrency on a long-term basis.