Cryptocurrency investors use the term to refer to buy-and-holding assets for a longer time horizon rather than making frequent trades. It is not only a popular term but is also considered an investment strategy. Hodling crypto only works with long-lived digital currencies that can build value over time. When you hodl one of the short-lived cryptos, that promised trip “to the moon” turns into a deep-sea dive with no return ticket instead. In a perfect world, you’ll never invest in any of these cash-burning crypto projects.

hodl

It functions as a medium of exchange and can also be held as an asset or investment. Decentralization is the major feature and advantage of cryptocurrency, as it is not issued by a central authority such as a country’s central bank. It’s a healthy part of a sensible cryptocurrency investing strategy when combined with serious research into the quality and long-term prospects of your cryptocurrencies. Most of us will do better with a well-researched hodling portfolio than a short-sighted day trading approach. It’s worth noting that ‘market timing’ — the act of trying to predict future price movements — is notoriously difficult and risky, even for seasoned investors. Satoshi Nakamoto, the creator of Bitcoin, designed it as a medium of exchange and a store of value, suggesting a long-term use case.

HODL community

If you’re a day trader hoping to profit from the rapid price swings in short-term trades, then HODLing will mean missing the opportunities to benefit from short-term price fluctuations in the crypto market. However, this isn’t the case for most cryptos with no long-term prospects. No matter how hard crypto investors might hold on for the dear life of these tokens, they might still end up becoming worthless, generating a loss for investors who employed the HODL strategy. Hodling sounds a lot like the long-term buy-and-hold strategy The Motley Fool employs in the stock market. The wealth-building benefits of compound returns make a bigger difference in a longer time frame.

  • HODLing might not be the best strategy if the investor is looking for short-term gains.
  • 100% physically backed by the underlying assets, the 21Shares Crypto Basket Index ETP (HODL) provides streamlined access to the top five digital assets by market capitalization.
  • To avoid such pitfalls, it’s crucial to conduct fundamental analysis before deciding to HODL.
  • They must have sufficient capital capacity to avoid forced sales or meet unexpected liquidity needs.

Stake crypto, earn rewards and securely manage 300+ assets—all in one trusted platform. The cryptocurrency world is full of exciting and interesting eccentricities, including the lingo. Hopefully, by going through this article, you have familiarized yourself with some of the more common unique terminologies used within the blockchain space. The term ‘flippening’ is used within the crypto circles to refer to a hypothetical moment in which the market capitalization of Ethereum surpasses that of Bitcoin.

“Diamond Hands” vs “Paper Hands” Terminology

It’s impossible to argue that long-term Bitcoin HODLers have not done well. Since its debut in 2009, Bitcoin’s value has climbed from just pennies to more than $70,000 at one point. So, a long-term buy-and-hold approach would have returned traders many times their initial investment, because the strategy prevented them from selling when things got tough.

It is the kind of mindset that will help you learn and contribute more positively to the community. However, since they have outsized positions, they need to sell while everyone is buying, so they keep shilling the asset as they offload their positions and once they stop pushing it. Typically, the price of the asset comes crashing down as the latter buyers look to exit their positions. The phrase makes more sense when used to refer to worthless coins or tokens – also called ‘shitcoins’ – that have little to no utility outside speculation.

HODL: The Cryptocurrency Strategy of “Hold on for Dear Life” Explained

One of the primary security features is its consensus mechanism, known as Proof of Staked Authority (PoSA). This hybrid consensus model combines elements of Proof of Stake (PoS) and Proof of Authority (PoA), ensuring that https://stablecapitalmax.net/ validators are both financially invested in the network and have a reputation to uphold. This reduces the likelihood of malicious activities, as validators have a vested interest in maintaining the network’s integrity.

Most new investors benefit from a simple buy-and-hold approach while learning the market. HODLing has made early adopters of Bitcoin and Ethereum very wealthy, especially those who held through multiple market cycles. While future gains may be less dramatic, long-term holding can still yield substantial returns if the asset appreciates.

It stands for “Hold On for Dear Life”, and today, it represents a mindset as much as a meme, the idea of staying committed to your crypto assets no matter how wild the market swings. HODL is one of those terms that’s shown up amid the rise of cryptocurrency. Much like the term itself, HODL encourages users to hold onto their tokens for rewards in the Binance coin (BNB) that are distributed every three days. The rewards are generated from taxes collected on transactions made by users, such as sale, purchase, or transfer of HODL tokens. The tax amount is converted into BNB tokens, and a percentage of the gains are redistributed to users from the collective liquidity pool.

Buy-and-hold investors tend to hold their assets for an extended period of time to profit from the long-term value appreciation. In contrast, traders are much more active in transactions and seek returns by buying at low prices and selling at high prices. HODLing means resisting the urge to sell your digital assets, even when the crypto markets are notoriously volatile. HODL, a meme project on BNBChain, was founded by DAYOU, who previously created ArbDoge. This cryptocurrency has garnered attention for its unique approach and community-driven ethos.