Are you familiar with the term “hodl” in the cryptocurrency world? Well, if not, then I guess you are a beginner and currently exploring every information about the crypto world.
For those who don’t know it yet, the term hodl is actually the misspelled version of the word “hold”. In the crypto world, hodl simply refers to the traditional buy-and-hold strategy of investors. But why do investors hodl? Let’s find out below!
Where does the term hodl come from?
Dating back to the 18th of December 2013, a crypto user named GameKyuubi sparked a thread in a forum under bitcointalk.org. During that time, Bitcoin’s value has increased from $15 in January to $1, 100 in December of the same year. However, due to crypto’s high volatility in nature, it suffered from a price plunge. By mid of December, the value of Bitcoin had dropped to only $438.
In response to that price plunge, GameKyuubi sparked a thread. But that guy accidentally made a typographical error of the word “hold” to “hodl” amid the thread. However, he explained that he was a bad trader and cannot determine the highs and lows in crypto. Therefore, holding the crypto is the best way that a not-so-good trader (like him) can do to prevent loss. From that moment, the GameKyuubi’s misspelled “hodl” gained attention from other crypto investors and traders. They adapted it and are still using it nowadays.
Why should you consider “hodl”?
Cryptocurrencies are highly volatile – and we all know that. During continuous price plunges, experts usually consider to hodl theirs to prevent from losing. One of the main reasons they consider hodling their crypto is to benefit from its long-term value appreciation. They also consider hodling to prevent themselves confined in a situation where they buy high but would just be able to sell it low.
For beginners, hodling their crypto is the best thing to do in times of a price plunge so they can avoid losing. Because beginners sometimes are lacking in skills in terms of dealing with such situations especially if a bear market takes place.
Is hodling a risky strategy?
Yes. Usually, an investor should have enough capital capacity to avoid financial problems like forced sales, unexpected liquidity needs, among others. If you haven’t enough capital, then hodling could put you at a huge risk.
Moreover, there is currently no policy for cryptocurrency. The threat of illegal activities and money laundering is very high since there is no central authority doing surveillance in it.
Entering the cryptocurrency world is like entering a box with many ups and downs. In the end, you might lose. But this would only just happen if you are not equipped with robust knowledge.
With this, always remember that hodling is one of the best solutions in times of price plunge. Long-term value appreciation of your coin/s is also a nice strategy to enter more doors of great opportunities. However, hodling without knowing its downsides is like hitting your head with two stones. So, before hodling your assets, ask this question first to yourself: Do I have enough capital?