The term HODL appeared due to a typo on the forum at the time when the Mt.Gox exchange was living out its last days. This happened on December 8, 2013, when a user of the BitcoinTalk forum under the nickname GameKyuubi decided not to sell his currency and published a post called I AM HODLING. The message meant I AM HOLDING. In this post, he admits that he is under the influence of alcohol intoxication and explains the rapid depreciation of bitcoin. For 10 days, the currency has lost half its value.

The term with confused letters was further developed and became an abbreviation. HODL (Hold On for Dear Life).

How does the HODL strategy work?

Since then, this term, together with a typo, has spread throughout the cryptocurrency community and has become very popular. Now, whenever someone communicates that he wants or plans Hodl, this means that this person is convinced that his сrypto currency will make a profit. If not in the near future, then later after a while.

HODL is a long-term investment strategy, very similar to the classic Buy & Hold method. Adherents of this strategy do not sell a cryptocurrency, because they believe in a significant increase in its value in the future. A HODL investor holds an asset even if it incurs losses. He believes that the global trend in exchange rates is always upward. Accordingly, the later he sells the currency, the more he will earn.

The HODL strategy involves long-term investments. Here are the basic premises:
  • the availability of free money is those funds that will not be vital for several years;
  • confidence and psychological stability - the investor should not succumb to panic when the market subsides and, conversely, euphoria with rapid growth.  The task of the holder is to hold funds when there is a desire to sell and steadily follow the intended trading goals;
  • guaranteed equity - with a long investment period, it is not recommended to use borrowed funds due to too high risks.
There is an opinion that it is long-term investors that form the real value of bitcoin. But transactional demand does not play a significant role. That is, bitcoin is alive due to the faith of its holders.

Cryptocurrency Strategy Benefits

Simplicity and accessibility. An investor does not need to have special knowledge or constantly monitor quotes, news, and forecasts. He needs to buy an asset at a low price at the right time and keep it.

Due to its simplicity and convenience, HODL is one of the most common and preferred strategies among crypto investors.

Almost everyone except active traders uses this method: beginners, “lazy” investors, connoisseurs of a particular coin, experienced investors who saw the potential of the currency.

Fighting volatility. The main way to counter the high volatility of the cryptocurrency market is to ignore it and believe in an uptrend. Many investors sometimes give in to emotions. For example, they sell an asset too early or drop it sharply when it falls, incurring losses. HODL investors usually avoid such mistakes.

Profitability. With a successful selection of an asset for long-term investments, profit can reach thousands of percent.

It took Bitcoin three years to recover from a fall in 2013. Investors who kept the coin all this time earned many times more than those who went into fiat earlier.


Buying and HODLing

To earn certain money without risk, many experienced users use a simple method. First, they buy a reliable cryptocurrency recognized in the market. Then they hold it for a certain period of time until the coins get a fair market value. For example, cryptocurrencies, such as Bitcoin, Ethereum, Monero, Binance, Tezos, Nexo and others.

These are suitable coins for purchase that can be kept for a sufficiently long period because they will necessarily rise in price in relation to the fiat pairs USD, EUR, etc.

Disadvantages of the strategy

Unclear prospects. Until now, the scammers were right, the long-term trend of most coins was upward. But the dynamics of courses can change the vector of movement, and a return to previous levels can last for years. Cryptocurrencies may be banned or they may simply be stolen from the investor’s wallet.

Risk overexposure. The coin may be futile. An unsuccessful choice of an asset may result in the loss of all funds for the investor.

Frozen funds. Invested money will not work for a long time - maybe several years.

You can’t withdraw profit. You can partially sell assets, but you won’t be able to regularly withdraw profits - the whole point of the strategy is lost.

Lost profits. Despite the uptrend of successfully selected coins, if an investor refuses to actively trade, he may not receive a profit. During sharp jumps in exchange rates, you can make good money on falling and rising. HODL investor misses this opportunity.

No risk control. When an investor simply holds an asset, he has no control over the risks. If one day the coin ceases to exist or its value drops to zero, the investor will be left with nothing.

Perhaps it is precisely because of these reasons that the popularity of using this method among investors is declining. The current trend of the popularity of the HODL strategy demonstrates a surge in interest in the strategy as the market rises and a decrease in interest during the correction. At the same time, many market participants consider HODL the most optimal strategy when working with cryptocurrencies.