The year 2013 was a very volatile one for Bitcoin. The foremost cryptocurrency saw its price surge from around $15 a coin in January to a peak above $1,100 in early December of that same year. It then quickly dipped to below $500 by mid-December. In the midst of all of this, an enthusiastic crypto investor, taken aback by happenings in the market, misspelt the word ‘HOLD’ as ‘HODL’ in a Bitcoin forum.

‘HODL’ instantly became a hit crypto slang referring to the long-term buy-and-hold strategy of crypto investing. The term has since been aptly retrofitted to mean ‘Hold On for Dear Life’. HODLers do not panic during periods of volatility or a bear market, as they believe in the long-term prospects of their crypto asset.

In recent years, there has also emerged a crypto token known as HODL. It is just another altcoin and bears no relationship with the famous crypto slang.

Open a Demo account to practice what you’ve learned or a Real account to start trading today!

Register Now Or Try Free Demo

What is the Meaning of HODL?

As mentioned, the term ‘HODL’ came about as a misspelling of the word ‘HOLD’. It is essentially an investment strategy or philosophy to invest for the long-term value of an asset. The logic is straightforward: if you believe in the long-term value of an asset, you should not be too worried about short-term price fluctuations or medium-term price trends. This buy-and-hold strategy is simple yet powerful. It is essentially a form of passive investing and eliminates the inherent risks of timing a market.

HODLing Stocks

Stocks are popular financial assets. HODLing stocks is essentially buying and holding them for a long time. Long-term stock investing can be done in 3 ways. First, there is growth investing, where investors focus on buying stocks of companies that are expected to expand in the long term. Examples of growth stocks include Apple, Netflix, and Facebook.

Secondly, there is value investing. Value stocks are those of companies that have been undervalued by the market compared to their underlying business fundamentals. Investors buy value stocks as they expect that value to be unlocked by the market over time.

Finally, there is dividend investing. Investors buy dividend stocks so as to maintain a more-or-less guaranteed source of periodic income over time. Holding stocks for the long term has proven to be profitable without the need to actively time their tops and bottoms. Stocks have historically maintained an uptrend over the long run.

HODLing vs Active Trading

As a strategy, HODLing has its pros and cons. The strategy is simple, time-saving, and attracts low costs. As well, HODLing has been proven to work in the crypto arena. For instance, Bitcoin traded for less than $1 in 2008, but by 2017, it traded for around $20,000. Of course, there were twists and turns, but for HODLers, patience pays.

But it can take a lot of time for HODLers to realise desired gains, and this can tie up capital that can be used to access other opportunities. In the short time that cryptocurrencies have existed, they have experienced devastating crashes that can take a lot of time to recover. HODLing through the market crash periods can expose investors to large losses.

In contrast, active cryptocurrency trading involves the buying and selling of assets according to market conditions. Cryptocurrencies are inherently volatile, and this can create numerous lucrative opportunities for active traders. Active trading also provides investors with great flexibility. That is, they can buy crypto assets when there is an uptrend and sell them when there is a bear market.

When trading actively, investors can also control their profits and losses – they can book or lock in profits when the market is going according to their prediction, or they can limit their downside if the markets go against them. However, active trading may be more costly because of the cost of opening multiple trade positions. Active trading is also a strategy that may not be ideal for beginners who are not well versed in technical and fundamental analysis.

What to HODL and When to HODL?

HODLing may be a simple, viable strategy, but not every crypto coin or token should be HODLed. It is important to look out for coins that have strong fundamentals and potential. Cryptocurrency prices are sometimes driven by hype, and this means targeting coins and tokens that have reasonable exposure. These are coins that are very liquid and have high market capitalisation, and ideally, they are exchange-traded. Coins that already have strong communities also have a decent chance of gaining traction because there are already investors that believe in their long-term potential.

When it comes to HODLing coins, the best time to HODL is anytime but ideally, to enter the market when prices are low. HODLing is based on a strong conviction of the long-term prospects of a coin, its utility or underlying project, as well as the broader potential of blockchain technology and the crypto ecosystem. Whether prices are trending higher or lower, HODLers are ready to play the patience game.

HODL Coin

Named after the famous crypto slang, the HODL token is a rewards-based decentralised finance (DeFi) token built on the Binance Smart Chain. The token is designed to reward investors for HODLing their tokens. HODL is a yield farming and liquidity generation token. By yield farming, it means that your tokens earn interest. This interest is generated from HODL investors who decide to sell their tokens, and there is a small ‘tax’ applied for selling.

HODL token investors are rewarded with Binance Coin (BNB) tokens periodically. HODL token is also used to provide liquidity in the crypto markets, and this can also generate rewards for investors. The coin was launched in May 2021 with a supply of 1 quadrillion, and this explains its low price in the market.

Crypto Slang

HODL is one of the most well-known terms in the crypto world. But other slang names have gained notoriety. Here are some of them:

  1. FOMO (Fear of Missing Out): The urge to jump into bubbles for fear of regretting missing out on trending opportunities.
  2. Diamond Hands: Displaying the courage of HODLing even through extreme market conditions.
  3. Paper Hands: A belittling term referring to investors who refuse to display Diamond Hands during market turmoil.
  4. FUD (Fear, Uncertainty, Doubt): Negative headlines and misinformation that should be avoided by crypto believers as it creates fear, uncertainty and doubt for traders and investors.
  5. Mooning: The notion that a crypto coin or token will rise exponentially, i.e. prices will rise to the moon.
  6. YOLO (You Only Live Once): Take the risk and buy a crypto asset because you only live once.
  7. Whale: Investors that own a lot of cryptocurrencies. Their buying or selling activity can influence prices.

Final Word

HODLing is a simple yet very effective investment strategy that can generate massive returns for crypto investors. Sign up for an AvaTrade account and test your trading skills on a demo account, then trade on a live account. Plus, gain access to a wealth of effective resources and trading tools.

Why AvaTrade?

  • Globally reputed broker regulated in multiple jurisdictions around the world
  • Advanced mobile and desktop trading platforms with access to over 8 financial asset classes
  • Attractive trading conditions, including low spreads, transparent prices and fast trade execution on all orders
  • Comprehensive resources including AvaProtect, AvaSocial, and Trading Central
  • 24/5 Professional support

Open a Demo account to practice what you’ve learned or a Real account to start trading today!

Register Now Or Try Free Demo

FAQ

  • What does HODL mean?

    HODL is a misspelling of the word ‘HOLD’, and it refers to the buy-and-hold long-term strategy of cryptocurrencies.

  • What is HODL token?

    HODL is a DeFi token that rewards investors for holding the token and not selling.