HODL is short for “hold on for dear life” and it’s a popular term among crypto investors. Although it looks like a funny misspelling of the word “hold” — and some say that’s how it began — HODL is actually anchored in the traditional buy-and-hold investment strategy.
For newcomers to cryptocurrency investing, HODL is one of many insider terms used in forums and articles. Call it crypto slang: Words like FUD, Moon, Sats, and HODL that originated as chatroom jargon are now commonly used cryptocurrency terms that crypto investors need to know. But as HODL has gained traction in other market sectors, you’ll hear other investors use it, too.
Here’s the story of how this term has become one of the most popular bits of cryptocurrency jargon in the industry — and, more important, how it might help your investing strategy as well.
What does hodl stand for, and how does the phrase “hold on for dear life” play into the deeper HODL meaning? For many investors, it’s easier to understand HODL in the context of another familiar investing term: buy and hold.
If you’re wondering whether to “hodl stock,” for example, then you’re essentially talking about buy-and-hold strategies. Buy-and-hold investors purchase stocks and other securities with the intention of holding onto them for the long term, regardless of market volatility.
The goal is to weather market ups and downs with an eye toward long-term gains, as history has shown that over time the stock market tends to trend upward. Or to put it another way: you want to hodl stock not sell it, if the market gets bumpy. This is a common tactic used by value investors.
But what does hodl stand for when discussing cryptocurrencies? It can be one of two things.
First, the basic hodl meaning can apply to a buy-and-hold strategy when talking about bitcoin or other cryptocurrencies as well. Again, the idea is to “hold on for dear life” rather than selling off cryptocurrency in a panic if volatility increases.
The second hodl meaning can refer to a specific type of cryptocurrency token called — what else? — HODL. HODL, also referred to as Hodl, is a community-driven token that operates on the Binance Smart Chain.
The Origin of Hodl
The term HODL originated as a misspelling of the word “hold.” Ultimately the acronym “hold on for dear life” was attached to the term.
Here’s what happened. On the fateful day of December 18, 2013, a trader with the username GameKyuubi (who later admitted to having had a whiskey or two), posted on a Bitcointalk forum:
“I AM HODLING,” he began his memorable, drunken rant.
In the 24 hours prior to his post the price of Bitcoin had fallen 39%, from $716 to $438. This was after a year-long bull run in which Bitcoin rose from $15 in January 2013 to a high of over $1,100 in December 2013.
Despite the turmoil, GameKyuubi had made up his mind to stop trying to time the markets, and to simply hold his Bitcoin from that point on.
“WHY AM I HOLDING? I’LL TELL YOU WHY,” the rant continued.
“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.”
Despite the confusing spellings, GameKyuubi was voicing a common frustration among traders with how to manage price fluctuations. But GameKyuubi defended his hodl strategy.
“You only sell in a bear market if you are a good day trader or an illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.”
The cryptoverse went wild. HODL became an internet meme within the hour, and its use as a legitimate investing term spread from there.
So, the TL:DR version of the hodl meaning? It came about as the result of a typo.
Hodl and Cryptocurrencies
As mentioned, hodl can mean one of two things when discussing cryptocurrencies. Investors may be talking about a specific HODL strategy they’re using to gauge when to buy or sell crypto. Or they may be referring to the HODL token itself.
At the core of the hodl approach is the idea that crypto investors shouldn’t be trading based solely on short-term pricing moves. Instead, cryptocurrency investors should hold on to their coins or tokens, riding out periods of volatility as they come and go. Even though cryptocurrencies may dip, pricing still has potential to rebound, making up for losses over time.
This is what happened with the June 2021 crypto market crash. Many Bitcoin investors saw all of their 2021 gains wiped out after the cryptocurrency’s price dropped dramatically. Other cryptocurrencies, including Ethereum and Dogecoin, also charted sizable losses. But the down market proved to be temporary, as many crypto prices have inched back toward their pre-crash levels.
Crypto investors who cashed out in the midst of the crash may have netted substantial losses. But those who chose to HODL instead may be eventually rewarded instead with much higher pricing moves as the cryptocurrency market rebounds.
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Understanding the HODL Strategy
The strategy of HODLing is more extreme than simply holding, hence the acronym Hold On for Dear Life. This means you should hodl crypto — or hodl stock — even through extremely volatile times.
This strategy can be a smart way for investors who might otherwise try to time the market. Hodl can be used especially when the market is going down to help investors resist the urge to panic-sell. This is especially smart for amateur investors who are more prone to emotional or impulsive reactions.
Investors who don’t use the HODL strategy may be similar to day traders or forex traders who seek to profit from volatility in the market. These investors attempt to buy low and sell high, or to short sell, profiting from smaller market movements rather than looking at the long term.
Although anything is possible, it’s unlikely that a downturn in the markets overall will result in a crash of the total crypto market, which is why a hodl strategy could make sense. It’s important to remember that even in the most dire downturns, like the market crash that precipitated the Great Recession, there was a noteworthy recovery.
Knowing When to HODL
Deciding when to hold or sell cryptocurrencies is a personal choice, and investors should do their research and due diligence before making those decisions. Some investors choose to adopt a HODL strategy across the board, meaning they buy cryptocurrencies to add to their portfolio and don’t plan to sell them for many months or years.
While this is a good move for people who believe in the long-term value of cryptocurrencies, it’s unclear what the outcome might be. The future of the industry is yet to be seen: hacks, bad news, and other world events can affect crypto prices (as they can in any market sector).
Some choose to HODL certain coins, but actively trade other coins that they don’t believe have as much potential for growth. Some HODL coins tend to be more established and stable, although HODLing a coin with a lower market cap could result in higher profits if it grows significantly over time.
The HODL strategy may be a good choice for investors who don’t want to spend a lot of time on their cryptocurrency portfolio or are new to the technical analysis of crypto investing.
No matter what sector you’re investing in, it’s always smart to build a diversified portfolio, so that if one market segment drops, others might be doing well and help to mitigate losses elsewhere. There are thousands of different cryptocurrencies available to invest in to build a diversified portfolio.
That said, the cryptocurrency market is still very volatile. As with any investment, it’s important to do research, pay attention to the market, and know that anything can happen, even the loss of an entire portfolio.
HODLing Coins and Crypto Wallets
If an investor is planning on holding onto a cryptocurrency for a long period of time, they’ll want to make sure their holdings are as secure as possible. Using a crypto wallet is the way to go. Crypto wallets are digital ways to store the passwords — or private keys — that give you access to your coins on the blockchain. Crypto wallets keep your coins safe from hackers but accessible to you, so you can send and receive different types of cryptocurrencies.
What is a crypto wallet, exactly? They come in different forms, including hardware wallets that look like a USB stick to mobile apps that even allow you to shop using crypto, the same way you would with any mobile wallet.
Knowing What to HODL
For HODLers, as with all investors, building and maintaining a diversified portfolio is key.
This may mean the investors need to add more money to their portfolio over time, or that they need to sell one cryptocurrency for another. For example, in previous years the price of certain coins has increased significantly, while other coins haven’t grown as much.
If you invest in a coin that dramatically increases in value, your portfolio could end up imbalanced with a large percentage of your holdings in that coin — which leaves you more vulnerable to losses if that coin fluctuates. In that scenario, you may want to rebalance your portfolio to maintain your original allocation and proper diversification.
While HODLing may be a good strategy, it’s not completely passive and involves paying attention to your portfolio and rebalancing over time.
Alternatives to HODL
Besides day trading and HODLing, others choose to SPEDN or BUIDL using their cryptocurrencies. These terms are twists on “spend” and “build,” inspired by the creative misspelling of HODL. But these are different from holding on for dear life, as they are strategies to help the industry grow, with the hope of making cryptocurrencies more valuable.
The philosophy behind spending (SPEDN) is that by using cryptocurrencies to buy goods and services, it encourages the adoption of crypto use in the real world. These days, with a growing number of outlets accepting crypto as a form of payment — and now some governments recognizing crypto as legitimate forms of currency — the SPEDN strategy could become an effective way to put more crypto in circulation.
Also, the cryptocurrency industry is young, and needs a lot of development and work. This is why some choose to build (BUIDL) companies, platforms, apps, and tools to use with cryptocurrencies. In fact, BUIDLers cast themselves somewhat in opposition to HODLers, making it their mission to encourage more people to build and contribute to the blockchain.
HODL in the Media
HODL has earned its fair share of attention in the media. Publications such as The Washington Post and CNBC have written articles explaining the hodl meaning for investors who are new to cryptocurrency trading. There’s even a site called The Daily HODL that publishes regular cryptocurrency news and updates.
Social media influencers and tech innovators have also embraced hodl as part of the modern vernacular.
Although HODL (or hodl) seems like a hip new crypto term for “holding on for dear life” in the face of volatility, hodling can also trace its origins back to the time-honored investment strategy of buy-and-hold. In this new iteration, though, there is a stronger mandate to hold onto your crypto and not panic-sell. As with any investment, selling during a downturn can lock in losses, whereas sometimes if you hold steady you may see a recovery — hence the wisdom of hodling.
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