Amidst the early days of cryptocurrency, the term HODL has been showing up in forums and private chat groups of crypto enthusiasts. This has been a strategy implemented when investing in crypto-assets and was proven effective during the Bitcoin boom that took place in the early months of 2020.
Despite its proven effectiveness with the apparent Bitcoin millionaires that kept their BTC assets for years since its inception, not many people are aware of the HODL strategy. What is it with HODLing and why does it make people rich? Learn more about it when you browse this article.
HODL meaning: What is HODL in crypto terms?
At the very core of this term, the HODL meaning is an acronym for Hold On for Dear Life. This implies that you hold the assets for as long as you can as if you’re holding on for your dear life.
Although that’s the meaning of the acronym, the term’s origin was a typo. In a BitcoinTalk forum back in 2013, an early Bitcoin investor named GameKyuubi mistyped the word hold for HODL and it caught on with the other investors that dabble in BTC.
Buy and hold strategy: How do you HODL your assets?
It’s easy to HODL your assets through the buy and hold strategy. You only need to keep your crypto coins in a safe and non-custodial wallet and make it your long-term investment.
The strategy doesn’t require necessary skills for you since all you need is patience and trust that your assets will rise in the years to come. This is helpful if you don’t feel confident about your trading skills
Where best to HODL your assets
The key to HODLing is to choose the right wallet where you’ll store your digital currency. You’ll be placing the assets there for a long time until the bear market for your token begins before you start selling.
Where are you going to store your crypto assets? Simply HODL it in either one of the following wallets:
Non-custodial hardware wallets
Hardware wallets are non-custodial by nature. This means that you solely own the assets that you store there. Depending on what hardware wallet you purchase, you can store as many as 100 digital currencies that the device can store. Some of the most popular wallets under this category are Ledger, KeepKey, Trezor and AirGap.
In comparison with other platforms that are custodial, decentralised exchanges or DEX give you the ability to purchase assets through the platform without having to deal with the custodial feature.
Instead of being an intermediary, DEX platforms have automated algorithms that handle large trading activities. Some examples of DEX are dYdX, Uniswap, PancakeSwap, ApolloX, and SushiSwap.
Exchanges with non-custodial wallets
Some exchanges offer non-custodial wallet services. This just means that you have sole ownership over the digital coins that you purchase from the exchange platform. You can also HODL these digital assets using the built-in wallets as long as they are non-custodial.
Assets that are popularly HODLed
Not all crypto assets and tokens should be HODL-ed. That’s because some assets perform better than others. For example, Bitcoin’s volatility does not stop it from rising in value to the tens of thousands per coin unlike other altcoins like Cardano, Solano and Dogecoin.
With this in mind, here are some of the assets that you should consider for HODL so you can increase your profits over a long period:
The best asset to HODL is Bitcoin. Many users and early Bitcoin investors that bought the currency in its early days and have not touched their assets are now millionaires because of the huge rise in the value of this coin over a decade.
When HODLing, it’s best to choose assets and tokens that have a stable value. That’s where stablecoins come into consideration. Since these are pegged to fiat money, the volatility of the value wouldn’t affect your investments too much.
Although the returns wouldn’t be as big as investing in Bitcoin, it’s still a smart choice if you want to keep it safe. Examples of popular stablecoins that you can invest in are Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and TerraUSD (UST).
Non-fungible tokens (NFTs)
NFTs have unique value to them depending on who created them or from what game it’s from. For example, if an artist who is unknown releases an NFT, the art increases in value the moment he or she becomes popular.
Another example of a good NFT investment is purchasing rare stats and other elements in games or metaverses. These will increase in value as time goes by since they won’t ever be minted again.
Should you HODL your crypto?
Now that you know the HODL meaning literally and functionally, the next question to ask is whether you should invest in crypto through the buy and hold strategy. Check out the pros and cons of this strategy as you scroll through the article:
Less time consumed in investing
You don’t have to always use your free time just to check out the trends of the crypto coin. There’s no need to keep an eye on the market every day because you’re giving the asset ample time to rise and recover from all the volatility.
More time to make rational decisions
Another advantage of HODLing Bitcoin or other cryptocurrencies is you get to extract yourself from the greed and fear cycle when the market prices go up or down. This way, you’ll have more time to think about how you’re going to go about the investment decisions on whether you’re going to sell or not.
It takes a long time to get profits
It’ll take years for you to profit from this strategy because you’re taking a passive position in the market. However, the returns are bountiful because you’ve let the asset grow and recover from the volatility.
You have to invest early before anyone else
The key to HODLing is to invest as early as possible. That’s what happened with the few early investors of Bitcoin in the early years of the pioneering asset. When they purchased BTC and kept those in their wallets, they got to reap the rewards a decade later.