What is HODL?
The term “HODL” first appeared on an online cryptocurrency forum in 2013 as a misspelling of the word “ hold ,” when a user told others that he or she would hold on to Bitcoin until the last one, despite the price drop. Since then, the misspelling has become a meme , then a slang word, and after some time it caught on as a term denoting a long-term asset holding strategy. HODL is cryptocurrency meme , the essence of which is approximately the following: "hold the coin to the last" or "hold on as if your life depends on it."
HODL strategy
If you look at the history of Bitcoin prices , its growth over the past ten years has been so impressive that the term “HODL” has become an integral part of the cryptocurrency community. However, its origin is not related to cryptocurrencies . This investment method, known as the buy-and-hold strategy, has long existed in traditional financial markets. It ignores short-term market fluctuations or downturns and focuses only on long-term growth and returns.
The "buy and hold" strategy is a passive investment method that does not require any additional operations. The logic behind this strategy is that financial markets tend to grow over time, so investors can enjoy the dividends of economic growth simply by buying the underlying investment.
Not all cryptocurrencies can be applied to the HODL strategy. In fact, only a few dozen cryptocurrencies can survive in the market after several cycles of bull and bear markets and maintain an upward trend in price. Any cryptocurrency is only part of a project based on blockchain technology . Over time, better solutions appear on the market or such solutions are implemented in top projects . This leads to the fact that the value of replaced projects falls and is seriously not restored. Therefore, the strategy of long-term storage is relevant for Bitcoin and altcoins included in the top 50-100 by market capitalization.
Additional HODL features
HODL opens up new ways for users to earn crypto. Including:
- Staking . It is a system in which cryptocurrency holders are rewarded in the same coins for keeping crypto in their wallets or blocking in smart contracts. Thus, they ensure the stable operation of the blockchain . Staking works on blockchains built with the Proof structure of Stake ( PoS ).
- Farming cryptocurrency . In order to be able to farm , you need to have two cryptocurrencies that are added to the liquidity pool (a pair of tokens in a ratio of 50 to 50). As in the case of a bank deposit, you cannot withdraw your money until the term of the contract expires ( farming conditions are regulated by smart contracts).
Advantages and Disadvantages of HODL
HODL is not just cryptocurrency meme , but also a completely working strategy that has its pros and cons. Among the advantages of long-term ownership of digital assets, the following can be distinguished:
- You save time and nerves. There is no point in following the daily quotes like ordinary traders and speculators do. In the long run, the price of one day doesn't matter.
- You don't need to know technical analysis. How the blockchain works , what smart contracts are, etc. — you don't really need all this. It is also not necessary to know the laws of trading : in the long term you will earn one way or another, the main thing is not to invest in scams .
- Passive income. Some cryptocurrencies allow staking and farming for profit.
- Other bonuses. Hodlers cryptocurrencies of some blockchains can sometimes get additional coins during hard times fork blockchain .
But like everything in this world, HODL has its drawbacks:
- Lost opportunities. If you don't follow the situation in the market, you can miss the opportunity to earn here and now.
- A long game. Experts recommend walking for at least five, or even ten years. However, this is the whole point of HODL, not every investor has the patience to hold an asset for years.
- Lack of ways to control risks. For example, traders have a stop- loss - an automatic sale of assets if the rate drops too low. Hodlers do not have such an opportunity.
- Risk of breaking the wallet. To protect against this, it is recommended to keep most of the funds in cold wallets that are not connected to the Internet.
What if you don't want to HODL?
Inspired by the misspelling of HODL, the crypto community also introduced new terms such as SPEDN (spend) and BUIDL (build).
SPEDN encourages people to use cryptocurrencies in the real world to buy goods and services or simply to pay bills with cryptocurrency . This is important because it promotes the adoption of cryptocurrency as a payment method. While BUIDL encourages people to create decentralized applications, platforms and tools that improve the crypto ecosystem.
Final thoughts
HODL has become a representative culture in the cryptospace , carrying the ideology of many members of the community, as well as creating many memes . Hoddle is also an investment and financial management strategy.
If you have no experience in crypto investing , you can use the HODL strategy. This will allow you to profit in the long run. Hoddling can be compared to investing in jewelry or an expensive watch. They just sit in your safe and grow in value over time.
Author: Nick CryptoDiffer for https://tsecrypto.com/article/shho-take-hodl/
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