If you spend time talking to cryptocurrency enthusiasts, you may have been told to HODL your bitcoin. HODL means “Don’t sell your cryptocurrency!” But why not just say hold, and where did the term HODL come from? This could be a quality investment plan for many who have just entered the crypto space. Plus, this sort of investment is similar to the “value investing” approach that has been made popular by Warren Buffett.
What is HODL?
The term HODL originated from a forum post in 2013 written by Gamekyuubi. This user, clearly intoxicated, titled his post “I AM HODLING.” He meant to title his piece “I am holding,” and this was far from the only spelling error in his post.
Although just a spelling error at the time, HODL has become an ideology for many crypto investors. In the post, the author rambled about how you can’t lose your cryptocurrency to the market if you don’t trade it. At the time, Bitcoin traded for only $100.
Investors who took this advice in 2013 bought Bitcoin in the 3-digit range and have HODLed their Bitcoin ever since. Each bitcoin these HODLers own is now worth several times what they paid.
Understanding the ideology of HODL is simple: Hold on for dear life –– don’t sell. As explained in Gamekyuubi’s forum post, if you’re not an experienced day trader, then you'll likely lose your cryptocurrency to the market.
HODL is a verb, and it can be used the same way as the word “hold.” The biggest difference between someone who HODLs Bitcoin and someone who holds Bitcoin is their ideology. HODLers are bitcoin holders to the max –– holders who won’t sell their investments because they believe that cryptocurrency is the future of finance. Therefore, determining where you land on this philosophy will help you decide how you wish to treat your crypto portfolio going forward.
HODL as a Strategy and Philosophy
If you really believe in Bitcoin and aren’t an experienced trader, you should HODL. If Bitcoin does become a mainstream commodity like precious metals, then each Bitcoin will trade for 6 figures. Because only 21 million bitcoin will ever circulate, the price will continue to rise as long as more people and institutions recognize Bitcoin as a store of value.
With Tesla CEO Elon Musk recently announcing that Tesla has added $1.5 billion in Bitcoin to Tesla’s balance sheet, more corporations will likely consider Bitcoin as a valid reserve asset. If Bitcoin becomes a mainstream reserve asset, HODLing your cryptocurrency could give you massive returns. Remember, though, HODLing requires you to weather the storm, waiting for the markets to return to normal and grow. As many investors have said in the past—no matter what happens, the market is ultimately rising in the longterm.
HODL in the Media
You’ll find the word “HODL” used often on Twitter. If you follow tech gurus like Tyler Winklevoss, you may have seen the term before. This month, Tesla CEO Elon Musk has tweeted about the term HODL tweeting: “Hodl the rainforests!!” Although “hodl” typically isn’t used outside of crypto investments, Musk means “Don’t sell off the rainforests!”
Knowing When to HODL
You should HODL if you aren’t confident you can beat the market by trading your cryptocurrency. If you believe in Bitcoin, its future price potential makes swing trading crypto much riskier.
Investors who shouldn’t HODL include swing traders and short-term investors. Some investors buy crypto during bull markets to try and make quick profits, even if they don’t believe in the long-term sustainability of cryptocurrency.
You want to accumulate Bitcoin during bear markets. Historically speaking, Bitcoin dips down between 80% to 90% each bear market, but then returns to break all-time highs years later. Over the past decade, Bitcoin’s price has risen an average of 200% annually, proving a profitable HODLers’ strategy.
That being said, nobody knows where the price of Bitcoin is headed. To get a sense of Bitcoin’s price trend since its inception, it’s good to use a logarithmic chart to account for volatility. Each candlestick in the chart below represents 1 month of Bitcoin’s price –– the long-term trend makes a convincing case for HODLing.
Become a HODLer
The best part about becoming a HODLer: It’s easy. All you need to do is set up a crypto brokerage account and purchase bitcoin, then just HODL.
Planning to invest a lot of money in cryptocurrency? You should purchase a hardware wallet. A hardware wallet stores your crypto on a physical device not connected to the internet so it’s impossible to hack.
Some good choices for crypto exchanges include Coinbase, eToro and Gemini. These exchanges offer mobile apps so you can manage your cryptocurrency on the go. All 3 of these platforms have simple user interfaces, so they’re great for beginners.
Can you HODL other cryptocurrencies? Yes. If you believe that you can’t beat the market and that these currencies will eventually rise in value, sit on them for years at a time if you so choose. For example, maybe you purchased 400 Dogecoins at a very low price. If you wait long enough, those tokens should appreciate in value as crypto adoption increases. You simply need to decide if this strategy is right for you.
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How are HODLers Supposed to Know When to Sell?
You should base when to sell your bitcoin on your goals as an investor. In general, you’ll find 2 types of Bitcoin HODLers, both with their own sets of goals. Both types of HODLers aren’t just Bitcoin holders, they are long-term believers in Bitcoin and truly think each Bitcoin will be worth 6 figures or more down the line.
“When Lambo” HODLer
The term “when Lambo” is a cryptocurrency joke used when discussing the price of Bitcoin. When Lambo just means “When could I get a Lamborghini?”
“When Lambo'' cryptocurrency HODLers base when to sell their Bitcoin on if they can afford a Lamborghini with their investment.
“Bitcoin Maximalist” HODLer
Bitcoin maximalist HODLers truly believe Bitcoin is the future of finance. They won’t sell their bitcoin Because they are sold on the idea of a decentralized financial system and only 21 million Bitcoins ever being minted. If Bitcoin ever were to take over the financial system, Bitcoin would be worth millions of dollars.
Is HODLing Legitimate?
You must be thinking that HODLers need to manage their expectations. The price trend makes a convincing argument for a more expensive bitcoin, but it’s a radical claim that it will hit anywhere near $1 million anytime soon. The same could be said for other cryptocurrencies. Sure, your Dogecoin holdings might not skyrocket, but you will make money because of your willingness to be patient.
At the end of the day, HODLers are just people who really believe in bitcoin. To many HODLers, holding bitcoin is more than just an investment. Since HODLers believe that cryptocurrency is the future of finance, HODLing crypto in its infancy makes them feel part of something revolutionary.
Frequently Asked Questions
Where did the term “HODL” come from?
The term originated from a post on bitcointalk.org in late 2013. The post spread around the bitcoin community soon after it was posted because people found the post humorous.
What does HODL stand for?
HODL means “hold,” but some people claim it’s also an acronym. HODL as an acronym stands for “hold on for dear life.” Bitcoin historically dips over 80% in bear markets before returning past its all-time highs, and this is why many crypto investors simply HODL.
What is HODLing in crypto?
HODL can be used any way the word hold is used. Being a HODLer means that you are a cryptocurrency holder and HODLing means that you are holding.
Don’t be mistaken –– “HODLing” and “holding” are not exactly the same! Holding simply implies that someone owns Bitcoin and you probably hold it for at least mid-term. If someone HODLs, then you don’t sell your Bitcoin anytime soon. HODLing is for true believers of Bitcoin. HODLers won’t sell their investment until Bitcoin is a mainstream universal store of value.
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