Even Bitcoin, now a relatively stable cryptocurrency, still registers 10-20% moves in some days. To understand and be part of conversations within crypto enthusiast circles, you need to know the community’s lingo. In this guide, we will explain what is ‘HODL,’ which is one of the most prominent terms used by cryptocurrency investors. Also, you’ll get to discover ten other common phrases to use in blockchain forums and chat groups.
Investors may have to experience extreme ups and downs of their asset values, which means they should have much larger risk appetites than investors of conventional investment instruments. They must have sufficient capital capacity to avoid forced sales or meet unexpected liquidity needs. Cryptocurrency is a type of digital currency supported by blockchain technology. It functions as a medium of exchange and can also be held as an asset or investment. Examples of cryptocurrencies include Bitcoin, Ethereum, Ripple, etc.
What does HODL mean?
Then, that person is left with “a coin they don’t want at a price they can’t sell it [at].” To make sense of such crypto-slang, CNBC Make It asked Peter Saddington, a serial entrepreneur and early bitcoin investor who runs a bitcoin community called The Bitcoin Pub, to break it down. Saddington first purchased bitcoin in November 2011 when one coin only cost $2.52.
- I’LL TELL YOU WHY,” their message read (this time spelling “hold” correctly).
- This is especially true with all the new Central Bank Digital Currencies (CBDC) that many governments around the world are developing.
- Compared to buying and holding, market timing needs a lot more skills and expertise, meaning beginners have a disadvantage with this strategy as opposed to value investment.
- The HODL strategy is about holding assets over the long term, which means that cryptocurrency investors don’t have to be concerned about timing the market.
- Our experts have been helping you master your money for over four decades.
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. Just like HODL, BTD or BTFD is a term used to encourage more investment whenever an asset’s price corrects during a rally, i.e., it dips. The correction is interpreted as a chance to buy more with the expectation that the price will inevitably rebound to the previous high. The term whale means a very large marine mammal that lives in the ocean.
Is HODLing a Good Investment Strategy?
Most importantly, you can store your coins in your free multi-coin wallet that you receive when you sign up. Inspired by the misspelling of HODL, crypto communities also encourage each other to SPEDN (spend) or BUIDL (build). Much like the HODL meme, they’re intended to help grow the crypto space. While the term initially was a direct reference to ‘hold’, in true crypto style, the term was ‘hard forked’ and now carries several meanings. “I believe this is crucial for new investors because they are more likely to act emotionally or impulsively,” Porter says. But Bitcoin’s gains don’t come without years of “HODLing” through stomach-turning losses.
- Mr. Duggan is also the author of the book “Beating Wall Street With Common Sense” and has contributed news and analysis to U.S.
- However, it’s actually this trading activity that causes cryptocurrency markets to fluctuate, this is because they’re largely based on the forces of supply and demand.
- In no time, the term HODL spread like wildfire throughout the crypto world.
- With a high-volatility nature, the price fell from $716 by 39% to $438 in mid-December.
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. This strategy relies on the theory that, although there may be short-term volatility in the market, stocks will provide a good return over the long term. However, as with crypto investments, it’s recommended to have a diversified portfolio and make well-informed decisions based on research or financial advice. However, whether it’s a good strategy or not depends largely on the individual’s risk tolerance, investment goals, and the specific cryptocurrencies they are investing in. Like all investment strategies, HODLing has its risks, including the potential for significant losses due to the market volatility of cryptocurrencies.
HODL or Day Trade
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- HODL is one of those terms that’s shown up amid the rise of cryptocurrency.
- The rewards are generated from taxes collected on transactions made by users, such as sale, purchase, or transfer of HODL tokens.
- It went parabolic, and as a result some day traders made money, but also many people lost out on the action (not the HODLers).
It’s a tricky game and quite challenging for traders to time their transactions exactly right so as to maximize their profits each time. However, as a HODLer, all you need to do is hold on and ignore all market fluctuations. The content of this article (the “Article”) is provided for general informational purposes only.
Other Crypto Slang Terms
Even though this is not the original meaning, we think this covers the idea of GameKyuubi fairly well. As he said himself, in a zero-sum game like trading, they can only take your money if you sell. Low cap coins are ideal for pump and dump schemes since instigators do not need to make huge investments to achieve the desired price action. Bag holder is a negative term used to describe anyone in possession of a significant amount of coins or tokens whose value has fallen to a level that it is unprofitable to sell. The strategy has proved right for the most part, as some of the larger assets have seen incremental value gains over a number of years. However, if an analyst could zoom into the monthly price action of most of these assets it would be evident that most experienced wild rides in short-term durations.
- Even though this is not the original meaning, we think this covers the idea of GameKyuubi fairly well.
- If you’re curious about making HODL a part of your portfolio, we can help you get started.
- The wealth-building benefits of compound returns make a bigger difference in a longer time frame.
- Therefore, traders interested in crypto need to carefully understand what they’re investing in with crypto.
- JSI uses funds from your Treasury Account to purchase T-bills in increments of $100 “par value” (the T-bill’s value at maturity).
Instead of buying low to sell high, i.e., timing the market, he would start HODLing onto his currency and not selling. “In a zero-sum game such as this, traders can only take your money if you sell,” he wrote. And if you’re a HODLer, capital gains aren’t the only way you can make money on cryptocurrency.
What is a “HODLing” investment strategy?
It’s important to conduct thorough research and consider seeking financial advice before making any investment decision. Despite the uncertainty, HODLing can be a powerful investment technique for those with an optimistic view of the future of crypto. It takes the guesswork out of timing the crypto markets—so while HODLers may not buy at the absolute “best prices” for their coins, they have the advantage of a long-term time horizon. If the strategy works out in their favor, their assets should be worth more in a few years, regardless of the initial price they paid. Plus, HODLers can add to their positions during bear markets (when prices are falling) because they believe in the future success of the assets. The crypto slang term was originally a misspelling of the word “hold” in a 2013 forum post, but it evolved into an acronym for the phrase “Hold on for dear life,” referring to a buy-and-hold crypto investment strategy.
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Other forum participants embraced the misspelling, and it soon became the subject of memes. The week the post was published, the price of Bitcoin dipped nearly 40%, as a result of actions taken by the Chinese central bank. On December 18, 2013, Bitcointalk user GameKyuubi uttered the phrase “I AM HODLING” as part of a rant against the difficulty and even futility of trading cryptocurrency.
Where did the term “HODL” come from?
Public’s Recurring Investing feature can help you use this strategy by automating your crypto investments. Trading digital currency is risky and the price canfluctuate significantly. On the other hand, the buy-and-hold strategy is widely considered to be a sound investing approach.
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With buy-and-hold investing, you generally choose stocks based on a company’s long-term success and prospects. Before investing, review the company’s standing, looking at things like earnings and sales, vision and background of management, and the overall status of the industry. HODLers typically focus on the long-term prospects of digital assets and don’t chase immediate profit. Come back in five years, hexn.io and you’ll find that some of today’s hottest cryptos never quite made it to the moon, and that diamond-hand hodlers lost a lot of money. There are thousands of cryptocurrencies on the market today, and the number of long-term winners in that group is much smaller. Some cryptocurrencies are jokes, others are money-making frauds, and another group has all the right intentions but flawed technical designs.
Some investors choose to HODL after buying during price drops, while others continuously invest over time, a strategy known as dollar-cost averaging. While some HODLers store their virtual currencies on centralized crypto exchanges (platforms for buying and selling cryptocurrency), many prefer to move their assets to self-custodial hardware wallets. A self-custodial wallet is strictly managed by the wallet holder, meaning there’s no centralized intermediary between the trader and their crypto. Keeping assets in a “cold” hardware wallet, like a USB drive, prevents hacking and theft— and unlike a centralized exchange, it’s completely offline. Although hardware wallets are less convenient to use, HODLers are hanging on to their assets for years, so they only have to worry about keeping the device safe until it’s time to sell.
What if I don’t ever want to see this again?
HODLing is a cryptocurrency investment strategy not unique to crypto but rather a rehashed term made to appeal to the eccentric crypto community. The term HODL emerged from a 2013 message board post on the Bitcointalk forum as an errant misspelling. With a relatively short history compared to other types of assets and fiat currencies, cryptocurrencies face a future with lots of unknowns. Without surveillance from a central authority, cryptocurrencies can be used for fraudulent activities, such as illegal transactions and money laundering. 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.
Why do people in crypto love to HODL their coins?
One in which long-term profits are sought, trying to get the maximum benefit from the cryptocurrencies they have. Moreover, in a normal crypto trading environment, people make money by buying and selling coins as their prices fluctuate. However, it’s actually this trading activity that causes cryptocurrency markets to fluctuate, this is because they’re largely based on the forces of supply and demand. Increased demand pushes prices upwards while significant selling pressure drives prices lower.
We do not include the universe of companies or financial offers that may be available to you. It’s been demonstrated that the post’s author made the correct decision. The price of Bitcoin began another surge in mid-2017 and reached a historic high of $19,167 at year-end. However, the price fell again after the 2017 surge; it hiked again during the COVID-19 pandemic and hit a new high of over $58,000 in early 2021.
These schemes are often orchestrated through apps like Slack or Telegram, he adds, and advises curious chatroom readers to beware of such gimmicks. An investigation into “pump and dump” schemes by Business Insider found the practice to be an “open secret among many cryptocurrency traders.” “A whale is someone who owns a lot of cryptocurrency,” Saddington says.