If you are new to the cryptocurrency industry, it won’t take you long to realize there are so many terms you need to know, and they can all influence your success. One of those terms is Hodl, which is used almost daily as the volatile industry adapts to changes. So, what does hodl mean in the crypto world?
What Does Hodl Mean?
Out of the tough technical jargon you will encounter in the crypto world, hodl looks like a spelling mistake. Hodl is derived from Hold On to Dear Life, so you can see why it is easy to assume crypto traders have their spelling wrong.
In the cryptocurrency world, hodl is a scenario where you hold on to coins when the market gets quite volatile. The term entered the social media and crypto scene back in 2013. At the time, Bitcoin’s value had plummeted from highs of $716 to lows of around $438. The 39% dip had many investors frustrated, which is when one investor called GameKyuubi posted “I am Hodling” on a Bitcoin online forum.
The seemingly innocent phrase later caught on, introducing an almost official cryptocurrency term, Hodl. This article will explore what hodl means in the crypto arena and how you can use it as a strategy to make better investment decisions.
What Does it Mean to Hodl in the Crypto Industry?
Investing in any cryptocurrency asset comes with its fair share of risks. It is a highly volatile industry, so any decision can have a good or unfavorable outcome. Hodling, as the hodl strategy is known, is when you decide not to sell your assets, even when their value changes for a while.
The hodl strategy satisfies the cryptocurrency intention. When the crypto industry was adopted after the global economic depression in 2008, inventors were looking to create alternative currencies that would eventually replace fiat currencies. Cryptocurrencies give you more control of your finances, where you do not rely on governments, companies, or banks before accessing your money.
With this in mind, a hodling strategy makes more sense to investors who still believe that cryptocurrencies will one day replace fiat currencies. So, these investors will mostly leave their cryptocurrencies in their wallets when the coins are depreciating, hoping that the coins will recover after a while.
However, even as you want to overcome tough times in the crypto business, it is imperative to understand when a cryptocurrency can recover after a bad run. There have been instances where top cryptocurrencies plummet but regain value after a while. In such cases, hodling will be a successful implementation.
But what happens when your cryptocurrency is doing well? Is it a good time to hodl or sell your coins? Let us explore your hodling options below.
When Can You Hodl Your Cryptocurrencies?
In the crypto world, there are instances when the value of the coins dramatically changes. In both cases, hodling is a strategy you can implement to avoid hurting your business. These are:
1. FUDs
FUD stands for Fear, Uncertainty, and Doubt and represents a period where these three reactions are caused by malicious or incorrect information to convince you to sell your cryptocurrencies. In most cases, a FUD is a marketing strategy used by competition to affect a cryptocurrency’s progress negatively.
Bitcoin, the leading cryptocurrency, has recovered from tough periods when influencers and governments encourage people to stop investing. For example, China recently banned mining or any Bitcoin transactions, which caused investor anxiety. As a result, many investors sold their coins and the crypto’s value depreciated.
While the FUD was successful, it only caused short-term losses to the crypto business because, after a few months, Bitcoin recovered its value and continues to grow. In this scenario, hodling was the best investment strategy because those who did not sell their Bitcoins rode out the sudden drop and eventually recovered their investment.
However, while hodling when times are tough is often a good investment strategy, it is vital to understand which cryptocurrency assets you can hold on to. FUDs are not created equal, and some can have fatal consequences even when history may indicate an asset can recover.
So, while observing patience and history, keep your mind open to how damaging a FUD is, lest you hodl assets that may never recover.
2. FOMO
This crypto term stands for Fear of Missing Out and represents a period where information online intends to convince you to buy cryptos at a high price, especially when their value is peaking.
While investors are more likely to develop anxiety when cryptos are struggling, FOMO creates the exact opposite reaction. While you can be tempted to invest in cryptos when they peak in value, it is also important to understand how you can apply the hodling strategy.
As we’ve seen, hodling is common when investors are not sure how their crypto business will recover after a dip, and they end up selling their coins, thus losing their investment when the assets recover. The difference with FOMO is that it is easier to have people invest when the value is appreciating, unlike when value is depreciating.
But, it becomes quite tricky to implement a hodling strategy in such a scenario. When times are good, most investors will prefer to sell their assets at a high price. However, if you’d want to hodl, it would be crucial to study your asset well to understand how easily it can recover from FUD.
Take Bitcoin as an example; history has proven that the crypto coin can recover from damaging FUDs. However, you will still need to estimate how fast it recovers the value difference. For instance, Bitcoin peaked at $69000 in November 2021, but at the time of writing, the coin had a value of $42981.
As a result, Bitcoin investors who held onto their assets then are still waiting to regain that peak level. So, a hodling strategy, in this case, becomes an act of patience and belief in the cryptocurrency intention of one day replacing fiat currencies.
Which Assets Can You Hodl in the Cryptocurrency Business?
Hodling is a strategy you can apply when times are good and challenging. But, as we’ve seen for both instances, hodling requires patience and the belief that cryptocurrencies will continue increasing their value regardless of volatility.
In the crypto world, you can hodl;
- Reliable cryptocurrencies. Whenever you consider implementing a hodling strategy, understand how reliable the crypto is. You must study history to see how well a cryptocurrency recovers from FUD and FOMO. Some of the best coins to consider are Bitcoin and Ethereum.
- NFTs. You can also hodl non-fungible tokens, but it is important, among other factors, to understand how popular the artist you bought it from is, as they can influence its worth in the future.
Takeaway
Hodling is a crypto investment strategy that allows you to avoid selling your assets regardless of volatility. You can decide to hodl when your crypto assets’ value plummets, and you can also hodl during good times when you anticipate the value will keep appreciating. However, even as you hodl, it is best to research thoroughly to avoid making the wrong business move.
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