Crypto Currencies

How well does the HODL strategy work?

HODL is one of the most representative words in today's cryptocurrency market. Many consider them the best method of investing in this type of asset, while others take it more as a philosophy.

In this article I will tell you what HODL is, how it came about, what makes it different from other investment methods and what you can expect from it.

Are you new to cryptocurrencies?
Are you new to cryptocurrencies?
If you want to start investing in cryptocurrencies, we recommend that you start buy your first tokens on Coinbase. If you deposit 100 euros by registering on OUR LINK, you will earn an extra 10 euros!

What is HODL?

HODL is a term coined in 2013 that is used to refer to an investment strategy in cryptocurrencies. The word comes from the English term "Hold«, but misspelled (yes, on purpose).

If you don't know English, "Hold" means to maintain, and that's what HODL refers to, buy cryptocurrencies and keep them in your wallet no matter what, without using them or doing anything. short or medium term transactions.

How did HODL start?

As I said, the HODL appeared in 2013, but it was not invented by a famous investor or a mathematician, but by a BitcoinTalk forum user, Game Kyuubi.

During' Year 2013, as Bitcoin price suffered disproportionate drops, this user posted a forum thread titled “I AM HODLING”, where he said he was not going to sell his Bitcoins and explained the reasons why.

His words were not ignored and within days he had already become a meme circulating on the internet. However, it is thanks to this community reaction that it is now one of the most widely used investment strategies.

HODL or trade?

There is no doubt that the world of cryptocurrencies is very volatile. For this reason, some investors are not ready to see their portfolio lose 50% of its value in a few sessions without doing anything.

Instead, these investors prefer to make a more active investment, strategically buying and selling some of their cryptocurrencies to earn higher returns. These are known as traders.

More what is the best investment strategy, HODL or trading? The truth is, it's all up to you, how comfortable you feel and what gives you better results.

If you're a calm, long-term investor who doesn't want to waste time looking at charts or doesn't fully understand how the markets work, HODL is perfect for you; you buy and forget

Of course, HODL isn't always so simple, especially in such a volatile market, as one can be tempted to sell when everything goes up or, in the worst case, when everything goes down.

Moreover, this strategy is not about investing in a cryptocurrency and holding it until the end of days. To do HODL, it is necessary to analyze the cryptocurrency upstream, its objectives, its partners, its development team…

However, you must be clear that the price of Bitcoin and other cryptocurrencies will always fluctuate, and even if in the short term its conversion with your local currency is lower, your investment remains the same.

In other words, if you have 1 BTC, no matter how much its price drops to $30.000 or rises to $60.000, your investment is still worth 1 BTC.

On the other hand, if you are good at analyzing market sentiment, cryptocurrency charts and like to trade, trading may be the best alternative for you. This way you can buy and sell cryptocurrencies and tokens to get returns or, if you prefer, increase the amount of assets you have of each currency, making your investment bigger and bigger.

Also, you should know that it is not necessary that you marry one of these investment modalities, but that you can allocate a percentage of your portfolio to each of them. This way you can HODL with 80% of it, and with the remaining 20% ​​earn cryptocurrencies to add to that 80%.

Similarities and Differences Between HODL and Equity Buy and Hold

Cryptocurrencies are not the only market in which investment strategies such as HODL are applied, but equity investors apply “buy and hold” long before Bitcoin existed.

Both strategies are similar, and as you can deduce, “buy and hold” is about buying and holding stocks for the long term.

As with the HODL, in order to successfully apply this strategy, it is necessary to carry out a good analysis of the market, to look for companies with high potential for improvement and to make a good entry into the asset in which you want to invest.

But these are not their only similarities, but in both investment methods, the fundamentals are mainly studied, a lot of time is saved in carrying out operations, the noise of the markets is avoided and they have proven to be profitable in the long term. .

Of course, not everything is alike, but it there are also very important differences which can condition the investment. The most important are:

  • Le cryptocurrency market does not close at any time, while the Exchange is only open on business days in each country.
  • Stocks can distribute dividends which, although they can be used to earn income while you own them, reduce the book value of the business and its ability to invest. On the other hand, with cryptocurrencies, you can hold and earn rewards without the cryptocurrency losing value, by staking, providing crypto loans or even adding liquidity to trades.
  • La volatility of Cryptocurrencies make the HODL process more difficult than stocks, whose prices move more slowly.
  • By buying and holding cryptocurrencies, you have the advantage of being the true owner of the asset, being able to transfer it from one portfolio to another to store it wherever you want.

Future of HODL in Cryptocurrencies

As you can see, HODL is nothing new, and some investors have been using this strategy since 2013. However, GameKyuubi was neither the first nor the greatest HODLER, rather the greatest Bitcoin HODLER would be its creator, Satoshi Nakamoto, with over 1 million Bitcoins in possession.

Despite all of this, there are still people who believe that HODL isn't worth it, although I'm sure investors who have HODLed since their Bitcoins were worth a few tens of dollars, disagree.

HODL is an excellent investment strategy, and it has proven to be profitable over the long term, although one clarification is in order: to make a good HODL, you have to select a project that is up to it.

Le problem with the current market is that there are thousands of different tokens and cryptocurrencies, so the work of filtering and analysis is very important.

Added to this is the fact that in recent years many new investors have entered the market, some of them thinking that any cryptocurrency they buy is going to follow the same path as Bitcoin or even worse, that they'll take a hit and get rich.

Thus, it is increasingly common to see projects that have no real merit or utility rise exponentially, even going so far as to sneak into the higher market cap coins, even though it is clear that time puts everyone in their place.

For this reason, true cryptocurrency investors have had HODL from the beginning and will continue to HODL until the end, because it is not just an investment strategy, but also a philosophy.


Source: https://bitcointalk.org/index.php?topic=375643.0

Similar items

Leave your comment

Your email address will not be published. Required fields are marked with *

Button back to top