What is HODLing?

If you’re a crypto trader, you’ve probably heard the term “HODL” before. But what does it mean? And is it a good strategy for trading cryptocurrencies? In this blog post, we’ll answer these questions and more. We’ll also discuss the pros and cons of HODLing, so you can decide for yourself whether or not it’s right for you. Stay tuned!

What is HODLing and how does it work?

HODL is an acronym that stands for “hold on for dear life”. It’s a strategy of buying and holding onto cryptocurrency, resisting the urge to trade it at volatile times and choosing instead to wait until the market settles down. If you HODL, you won’t make any money overnight — but if you play your cards right, you could end up with a nice chunk of crypto in the long term. 

How did HODLing start?

According to Bitcoin Talk forum user GameKyuubi, HODLing originated from a drunken Bitcoin Talk forum thread that started after GameKyuubi posted this: “I AM HODLING” in a topic called “I AM HODLING for the newbies”. He was trying to convey that he had faith in Bitcoin and was going to hold onto it despite its volatility. This sentiment resonated with other users, who started calling it a day-trading strategy. GameKyuubi later explained that he wasn’t drunk when he wrote the post, but was instead “sleep-deprived”.

Essentially, HODLing happened organically. It wasn’t invented by anyone in particular to become a formal strategy. Instead, it emerged from user comments on Bitcoin Talk forum posts.

The benefits of HODLing

Reading more on cypherpunkholdings.com reveals that there are several key benefits of using the HODL strategy in cryptocurrency trading. Here are some of the biggest ones:

1. You can make big profits over time if you’re patient.

If you hold onto your cryptocurrencies for a long period of time, you could potentially make a lot of money. For example, if you bought Bitcoin for $1,000 in January 2017 and held onto it until December 2017, you would have made a profit of $10,000. 

2. It’s a low-risk investment.

Compared to other types of investment vehicles, cryptocurrencies are relatively low-risk. This is because they are not as prone to market fluctuations as stocks or Forex markets. 

3. You won’t pay transaction or withdrawal fees on exchanges.

Many cryptocurrency exchanges levy transaction fees on traders. So if you sell your cryptocurrencies and then buy them again, you’ll end up paying a fee each time — resulting in a loss of money over time. With HODLing, however, there are no withdrawal or transaction fees to worry about.

How to start HODLing?

The best way to get started with HODLing is to open an account on a reputable cryptocurrency exchange that supports the strategy.

Some examples of exchanges that support HODL include CEX.IO, Poloniex, and Binance.

Once you’ve opened your account, buy cryptocurrencies using fiat or other digital currencies. Then, simply hold onto them until the market settles and be patient.

If you’re feeling particularly brave, HODL during a bearish market — when the price of cryptocurrencies goes down for consecutive days or weeks. This can be risky because your holdings could end up dropping to zero if you don’t sell in time (like GameKyuubi). However, if you HODL long enough and end up riding a bull market, you could stand to make a lot of money.

Tips for successful HODLing

If you want to get the most out of your HODL strategy, there are a few things you can do. Some of these include: 

– Create an emergency fund. For instance, if you have $1,000 in cryptocurrencies and are planning to HODL long-term, put some of that money into cash equivalents like savings accounts or money market accounts. That way, you won’t feel the need to sell your cryptocurrencies when they hit a low point.

– Build your own portfolio of altcoins. Your HODL strategy will be more effective if you diversify it across different types of cryptocurrencies. For instance, if you’re just starting out with cryptocurrency, you might want to build your portfolio with Bitcoin, Ethereum, Litecoin, Ripple, and Monero. Doing so will make your investments more resilient when the market suddenly declines (like in January 2018). 

– Develop an exit strategy. As mentioned earlier, make sure you have an emergency fund or cash equivalents on hand in case you need to sell your cryptocurrencies quickly. You should also have a plan for how you’ll spend the money in case of an emergency (like medical expenses). That way, you won’t feel the need to cash out your cryptocurrency holdings during a market slump.

– Invest only what you’re willing to lose. Cryptocurrencies are volatile assets — meaning there’s always a chance that their values will suddenly drop. So if you’re not prepared to lose some or all of your investment, then HODLing may not be the best strategy for you.

The risks of HODLing

While HODLing seems like the perfect way to make money with cryptocurrencies, it’s not without its risks. Some of these risks include: 

– You might miss out on profits if you wait too long. If you don’t cash out your cryptocurrency holdings at the right time, there’s a chance that their values may drop significantly. Since the markets are so volatile, you might miss out on big profits if you wait too long.

– You might sell at a loss. It’s important to have an exit strategy in place so you don’t hold onto your cryptocurrency for too long and end up selling it at a loss. 

– You won’t receive any dividends or ‘spinoff’ coins. Some cryptocurrencies, like NEO and Stellar Lumens, can produce additional digital tokens (called ‘dividend’ tokens or ‘spinoff’ coins) that have the potential to increase in value. HODLing these cryptocurrencies won’t earn you any dividend tokens or additional spinoff coins, so there’s an opportunity cost associated with holding them.

Final thoughts

Conclusion paragraph: HODL is a trading strategy that has been used by many people over the years and despite its ups and downs, it continues to be one of the most popular crypto-trading strategies. This article has provided some tips on how not to lose your coins as well as some other main characteristics of this strategy. We hope you were able to learn something new from our blog post today!