The cryptocurrency market is an alien concept for the uninitiated. Just like the stock market, there is a plethora of jargon that you will come across while learning about cryptocurrency.
Most of these terminologies are essential to understanding cryptocurrency and blockchain technology, especially if you are looking to start investing or to trade.
One of the most common words you will encounter in the crypto arena is HODL. There are different theories about how the word came to be, given that it is not an official English or even business name. However, the name has been around for a long time and is now popularly used by crypto investors.
What exactly does HODL mean? When was the term first used?
Read ahead. We will be discussing two possible meanings of the word HOLD and then take a quick dive into its origin and when it was first used.
What Does HOLD Mean in Cryptocurrency?
There are two common theories that have come up to try and explain what the term HODL mean in cryptocurrency.
The first theory states that the word is merely a misspelling of the term HOLD, which is used to describe buying and storing your cryptocurrencies until the price is higher than the selling price.
The second theory argues that HODL is an acronym of the words Hold On for Dear Life. This basically has the same meaning as HOLDING with a bit of a twist.
So, which of these two theories are true? Let’s look at the origin of the word HODL, when it was first used and who used it for the first time.
You will also learn why the ‘misspelling theory’ is the most likely explanation of the word HODL
The Origin of the Word HODL
When you look for the meaning of the word HODL in cryptocurrency, this is the story you will most likely come across.
Apparently, the term HODL was first used in a cryptocurrency forum known as Bitcoin Talk back in 2013. A user with the username GameKyuubi wrote a forum post titled “I AM HODLING”. Most people believe that the forum user was intoxicated and merely misspelled the word “HOLDING”.
This is further proved by the fact that most of his post was laden with semi-coherent explanations and grammatical errors. The user also confirmed at the end of his post that he had had some whiskey.
GameKyuubi was ranting about how he was a bad trader and why he was holding instead of selling like everyone else was. The post came after the price of Bitcoin fell from $716 to $438 after reports that the Chinese Government was cracking down on the then-new and highly unregulated cryptocurrency. So, many people rushed to sell their stash before the effects of the crackdown got up with them.
Within an hour of posting, the word HODL went viral and soon made its way into memes and other lighthearted posts about cryptocurrencies. HODL is now an official trading term that is used by some cryptocurrency investors to mean HOLD.
So, Where Did the Acronym Theory Come From?
The Acronym Hold On for Dear Life is one of a few that have been derived to explain the meaning of HODL. While they put up a good explanation, they are merely folk etymologies and do not depict the original meaning of the word.
In this sense, the word HODL is used to mean diehard Bitcoin Holders. These are investors who won’t sell their investment even when the price rises because they strongly believe that Bitcoin and other cryptocurrencies are the future of Finance.
Hodlers would rather wait to use their Bitcoin as a mainstream currency instead of trading it as an investable asset.
HODL As a Bitcoin Investing Strategy and Philosophy
After many years of use (mostly as an inspiration for internet memes), the word HODL has now become an official Bitcoin trading strategy.
Here is the secret behind the HODL strategy.
In the cryptocurrency world, people who HODL are usually inexperienced traders but who have a lot of faith in the future of Bitcoin. These traders believe that one day, Bitcoin will become a mainstream currency with a six-figure value. That is why they can’t risk losing any of their investments for short-term trading gratifications.
These traders argue that given Bitcoin’s limited supply, the price will always rise as fewer and fewer coins remain in circulation and more investors and institutions recognize it as a store of value.
In a nutshell, HODL is now used to describe an investing strategy where investors are discouraged from trading based on short-term price swings. The approach basically stems from GameKyuubi’s rationale in his drunken forum post. That is, inexperienced traders are more likely to lose their investment in short-term trading since they cannot correctly read and interpret vital signals.
The safest approach for them, therefore, is to simply HODL and wait until their investments become highly profitable when the price goes up. Hodling can also help traders avoid two common mistakes in the cryptocurrency market. These are:
- The Fear of Missing Out (FOMO) that can cause traders to buy high
- Fear, Uncertainty, and Doubt (FUD) that can cause traders to sell low, also known as SODling.
Hodlers believe that cryptocurrencies will someday supplant fiat currencies and become insanely valuable. They, ideally, do not believe in exchanging cryptocurrencies for traditional money.
There is one popular meme that perfectly captures this maximalist philosophy. The meme is a satirical version of the Matrix Movie where Neo asks Orpheus “ "What are you trying to tell me, that I can trade my bitcoin for millions someday?" and Orpheus responds, "No Neo, I'm trying to tell you that when you're ready … you won't have to."
That, according to Hodlers, means that a time will come when you won’t have to sell your Bitcoin for fiat money because there won’t be any fiat money but only Bitcoin.
Quite optimistic, huh?
It gets even more interesting because we are going to show you exactly how to HODL cryptocurrencies for maximum future profits.
Different Ways to HODL Cryptocurrencies Like Bitcoin
Hodling has become a popular investment strategy, especially with Bitcoin investors. The strategy has a plausible ROI with small risks of losing money when compared to short-term trading.
There are several ways to hodl cryptocurrencies. However, before you can hodl, you will need to first buy the cryptocurrency from an exchange like Binance or CoinBase. This means signing up for one of these platforms then buying the crypto with fiat money such as USD or GBP.
After buying your Bitcoin, you will need to store it in a “wallet”. You can either use an online/hot wallet or a cold/offline wallet.
Hot wallets can be accessed through the internet and include:
- Web wallets that are hosted on a website
- Desktop wallets that are downloaded to your desktop but need an internet connection to access
- Wallet apps that are downloaded to your phone from the App Store or Google Play Store
- Exchange wallets that are assigned to you by the trading platform or exchange you sign up with.
Cold wallets do not need an internet connection to access. That means that, unlike hot wallets, you cannot access them from anywhere you want. They are mostly USB or Bluetooth devices. The most popular types of cold wallets include Trezor, KeepKey, and Ledger Nano.
Cold wallets are generally safer since they cannot be accessed by hackers. So, when you HODL, we recommend that you keep your investment in a cold wallet for safe long-term storage.
If you need some to trade or use, you can keep it in a hot wallet for easy access.
Hodling Vs Trading Cryptocurrency: Which is the Most Profitable Option?
Is it Better to HODL Cryptocurrency or trade?
While Hodlers generally don’t like short-term trading, it is still a potentially profitable option. However, unlike any investment strategy, it has its ups and downs. In this section, we are going to look at which is better between trading and Hodling when it comes to investing in Bitcoin or other crypto assets.
First, let’s look at each individual strategy and why it is a good or bad option.
As we have already mentioned above, Hodling Bitcoin or any other cryptocurrency is whereby you buy an asset then hold it for long periods of time. This strategy is good for novice investors who don’t have any trading skills.
For example, when you HODL Bitcoin during a bull market instead of selling like everyone else, you can avoid surprises that might come as a result of wild corrections that usually precede price surges.
On the other hand, hodling crypto assets through a bear market can result in unspeakable losses. Below are some pros and cons of hodling.
Why You Should HODL
- Hodling is a simple strategy, especially for novice investors
- Hodling can prevent you from being shaken out during a bear market
- Hodling can be highly profitable in the long term
Why You Shouldn’t HODL
- When the price goes against your expectation, Hodling can result in significant losses
- Hodling only works if the price rises. You can’t profit from price drops like with leverage trading.
Bitcoin investors can also utilize trading to make short-term gains. Unlike hodling, you can buy and sell Bitcoin or other cryptos whenever you want. You don’t have to wait for years for the price to double or triple, so you can make profits.
Some types of trading, such as CFDs trading, allows you to profit from both Bitcoin price falls and rises. This makes trading more profitable since you can make money despite which direction the price goes.
However, trading Bitcoin or Ethereum is riskier than hodling and requires a lot of skills and risk management in order to be successful. Here are some drawbacks and benefits of trading instead of Hodling.
Why You Should Trade Cryptos
- You can profit from both price uptrends and falls
- You can take advantage of profitable price actions whenever they happen
- You don’t have to wait for many years to make a profit
Why You Shouldn’t Trade Cryptos
- A lot of risks involved
- Requires to be skilled and understand different market signals.
The term HODL has come a long way and is now popularly used in the cryptocurrency community. HODL is nothing but a misspelling of HOLD. However, the term is now used to describe Bitcoin diehards who strongly believe in its potential to supplant fiat currencies.
HODL has now become a popular investing strategy that is commonly used by novice investors who are not skilled at trading. The idea is to buy and hold on to your Bitcoin until you feel that the asset is ready for mainstream adoption or much more valuable than when you both.
When it comes to choosing between trading and hodling, it mostly comes down to individual investment goals. Do you want to invest in the long term or short term? How long are you willing to wait before you can sell your crypto?
Usually, we recommend doing a combination of both, so you don’t risk putting all your eggs in one basket. You can hodl a good percentage of your total investment then use the rest to trade.
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Frequently Asked Questions About HODLing Crypto
The concept of HODLing cryptocurrencies attracts a lot of questions, especially from novice investors who are just starting out. We have rounded a few popular questions based on what is commonly asked by users in crypto forums and social media.
We hope these answers will help you further understand what exactly HODLing cryptocurrency like Bitcoin means.
What Does HODL Mean In Crypto?
While some people in the crypto community have reframed it to mean “hold on for dear life”, HODL was originally a misspelling of the word HOLD which means buying cryptocurrency and storing it for a long time.
The term has since become a popular trading strategy, especially for new investors who are not skilled in complex trading.
How Do You HODL A Crypto?
To HODL a cryptocurrency, you buy it then store it in your wallet for a long time. When you HODL, you don’t sell your asset even when the price is very high.
The point is to hold your crypto for as long as possible with the hope that it sometimes supplants fiat money and becomes mainstream cryptocurrency. By then, it would be wildly valuable. If you do decide to sell for profit, you are encouraged to sell only a portion of your investment and not the whole stash.
What Is HODL Bitcoin?
HODL Bitcoin means buying Bitcoin and storing it in your wallet for a long time without selling. The term can also be used to mean “Hold On for Dear Life” which loosely be translated to not selling your Bitcoin investment no matter how high the price goes.
While the term HODL is now used when describing all cryptocurrencies, it was originally used for only Bitcoin, back when there weren’t that many altcoins.
What Crypto Coins Can You HODL?
If you can buy a cryptocurrency and store it in a wallet, then you can HODL it. That is essentially a majority of cryptocurrencies in the market. However, the most common options are Bitcoin, Litecoin and Ethereum.
Is It Better To Trade Crypto Or HODL It?
Whether to HODL or trade crypto depends on your investment goals. If you want to make quick returns in a short time, then trading would be the better option for you. However, if you are confident in a cryptocurrency, believe that it will be highly successful in the future and are willing to wait for years before selling it, then you can HODL.
We find a combination of both trading and HODLing to be a good strategy. This will help reduce risks, especially if you end up HODLing a failing crypto, and ensure you enjoy your investment without waiting for years.
So, you can trade a portion of your crypto assets then HODL the rest. Trading crypto can be a more profitable strategy than HODLing alone.
What Is The Safest Way To HODL Bitcoin or Crypto?
Most veteran traders don’t like the idea of HODLing as opposed to trading. And while HODLing highly volatile assets like Bitcoin may not be as profitable as trading, sometimes it is the safer option.
However, not all HODLing methods are safe. Let’s quickly go through some of the safest ways to HODL your crypto assets.
- Store in a cold wallet: A cold wallet is one that is not connected to the internet. For example, your flash drive. These are less vulnerable to hacking, so we recommend them for long-term HODLing.
- Don’t store all your assets in one place: Putting all your crypto in one storage space is risky, especially if it is a sizable investment. You should divide it and put in different flash drives while storing some on a reputable crypto exchange.
- Do some trading: If you have the skills and believe you can make some profits through trading, feel free to use some of your stash. This way, you might increase your investment instead of simply letting it stay in a wallet.
How Long Should You HODL?
Most diehard HODlers believe that you should hold your crypto assets until they become mainstream currencies. However, only Bitcoin might actually see any plausible adoption any time soon. So, unless you are very confident in the crypto you're HODLing, you might want to consider selling it after some years.