What Does HODL Mean And Is It A Good Strategy?

Jump to page contents

What Does HODL Mean And Is It A Good Strategy?

HODL is a popular term, used in the cryptocurrency sphere to indicate a type of investment strategy. Whilst the term might seem like just a misspelling to anyone outside of the crypto community, insiders know that it is amongst the most popular jargon in the world of decentralised digital currencies.

Crypto-investing and Where HODL Comes in

When considering the basics of crypto-investing, there are two primary strategies. Those who see cryptocurrencies as simply another tradeable asset, just like stocks and forex, seek to capitalise on the high volatility which most digital currencies experience. As a result, these traders seek to day trade or short sell cryptocurrency, together with trading a variety of advanced financial instruments, such as Bitcoin Contracts for Difference and Cryptocurrency Futures.

With this type of investment strategy, traders seek to turn a profit both when the price of cryptocurrencies rise and also when it dips. Generally, trades are short term, oftentimes lasting just one day or even less. Often these traders would close a position and limit their losses, rather than consider the potential gains in the medium to long term.

The second primary strategy is the HODL, which is affectionately known as Holding on for Dear Life. Traders who HODL consider cryptocurrency as a special type of asset, whose value is determined over a longer period of time. No matter if the price of a cryptocurrency dips, these traders will keep ownership of it. This investment strategy was significantly tested in 2017 when Bitcoin’s price slumped from almost $20,000 to $6,450 a few weeks later.

How was the term HODL invented?

The term, HODL was first used, accidentally, in a Bitcoin talk forum in 2013. A member nicknamed GameKyuubi created a thread called “I AM HODLING”, most probably while he was drunk. The thread came as a result of Bitcoin’s significant fall at the time. The term was quickly adopted by bemused users, and following the success of numerous memes, it quickly became part of the cryptocurrency phraseology.

The Logic Behind Crypto-trading

There are several factors which make cryptocurrency trading a viable proposition. Traders have different motivations; while some enjoy being part of a fast-paced and unpredictable market, others want to be part of the greater blockchain revolution. 

A common phrase in the cryptocurrency trading sphere is “slow dime or fast nickel”. The term slow dime refers to the investment strategy which seeks to generate a substantial return over a long period of time. Fast nickel, meanwhile, refers to the strategy of smaller, but faster returns. The latter strategy represents the majority of new traders who joined the cryptocurrency markets since December 2017, when Bitcoin was approaching $20,000.

One of the most seductive allures of cryptocurrency trading is FOMO, the Fear of Missing Out. Hearing overnight success stories of riches created a frenzy of new investors. Over time, this fascinating allure has diminished, yet the high volatility of cryptocurrencies remains a tempting investment nonetheless. Today, even fast nickel traders are trying alternative strategies, such as trend trading, as it reduces the risk of short-term fluctuations by providing longer-term planning.

HODL: Why it’s A Good Strategy

When HODL was first used, Bitcoin’s price dropped 24.7%, as part of the 46% slide that took place during the December-January period. A significant drop such as this is when amateur investors normally panic and sell to limit their losses. However, investors who believe in the future potential of blockchain and cryptocurrencies, won’t need to panic, since any losses are most probably temporary.

The more traders HODL, the more credibility is given to the cryptocurrency industry as a whole. This should, in turn, increase investor confidence even after a slump, raising the price once more.

Although historical information is no guarantee of future performance, markets tend to repeat themselves over time. The possibility of a catastrophic situation occurring, resulting in the complete eradication of the industry is virtually zero. This means that any short-term emergencies or panic will pass, and any downtrends will eventually be reversed. HODL is a good strategy as it is not only used in the cryptocurrency market, but also on the traditional asset and commodity markets.

When to HODL

binance hodl
Screenshots are shown for illustration purposes only. Actual product may vary.

There is no particular moment when you should HODL, but rather you should diversify your investment so that you can afford to HODL at any time, for as long a period as necessary. Diversifying allows you to spread the risk by investing in several different coins. One of the best exchanges to carry out diversified investments in cryptocurrencies is Binance since you get access to over 400 different coins as well as plenty of historical and analytical data.

Concluding Thoughts

Although HODL might seem like a recent invention, in reality, it has been called different names since the beginning of public exchanges. HODL is a great strategy if you are patient and willing to plan for the long-term, but not suitable if you are seeking to get rich quick. Perhaps, through increased HODLing, the cryptocurrency market will eventually grow sufficiently to challenge primary fiat currency markets.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides


All you need to know about Litecoin ATMs

Litecoin has the reputation for being the second cryptocurrency that was created after Bitcoin, so it makes sense that Litecoin ATMs are on the rise. It can be used as a medium for payment anywhere around the world without any interference from a third party. Litecoin has $11 billion and a maximum supply of 84 […]

1 September, 2021

Comprehensive Guide For eToro UK Users

eToro is a fintech start-up and is considered among the first pioneers of social trading. It was founded in 2007 in Tel Aviv, Israel. It is headquartered in Greater London, United Kingdom, with offices in Limassol, Cyprus, Sydney, and New Jersey in the US. The fact that it’s headquartered in London makes it appealing to […]

26 August, 2021
Crypto Mining,Cryptocurrency

Make your Own Cryptocurrency

Cryptocurrency is a decentralized digital currency that is not issued by a central financial authority. Cryptocurrencies are also used as a form of exchange for products, services, and also fiat currencies. The majority of these cryptocurrencies are created by tech and financial companies to serve specific purposes. For example, the Ethereum technology is used for […]

19 August, 2021

Crypto Coin Vs Token — Which One To Choose In 2021?

There are so many things to learn about cryptocurrency, the learning never stops. When it comes to Crypto coin Vs Token, there are a few things you need to know to be able to differentiate between these two digital assets. Some of the things you need to know about these crypto-assets include their definitions, functionalities, […]

11 August, 2021

Is Reddcoin a good investment in 2021?

Reddcoin is a decentralized cryptocurrency that serves as a digital peer-to-peer medium of exchange with no central authority issuing or regulating it. It was launched in 2014, a year most consider as the peak of cryptocurrency creation and blockchain technology. There is a total supply of 28 billion with a circulating supply of the same […]

3 August, 2021

Is Litecoin a good investment right now?

Litecoin is popularly known as the second cryptocurrency to be created, as it came to life in 2011 by a former Google employee, Charlie Lee. It is an open-source software that aids peer-to-peer cryptocurrency transactions. It is quite similar to Bitcoin and most times referred to as an altcoin or spinoff of Bitcoin. We cover […]

21 July, 2021

5 Top Altcoins That Will Explode in 2021

Cryptocurrency is a concept known to virtually every human on the face of the earth. From the launch of the first cryptocurrency, Bitcoin, it has gradually become an acceptable financial concept that has the potential to take over from the traditional fiat currency. Apart from Bitcoin, which is widely known as the most popular and […]

14 July, 2021

What is the Fear and Greed Index?

No crypto investor wants to buy an overvalued coin only to discover that their long position has been Swiss-cheesed even before the move was made. More often than not, the glittering of a ‘coin’ is a question of unstable human emotions instead of adequate research and tenable data. To properly evaluate the worth of a […]

5 July, 2021