What Is HODL: 6 Things You Should Know About Long-Term Strategies
By FOIN Official on Altcoin Academy
HODL or long-term strategy is one of two crypto investment strategies. Alternatively to trading (a short-term strategy), hodling is a passive way of investing, which seems to be pretty much attractive: no stress, no everlasting checking crypto market rates, and no technical analysis. In plain language, investors just buy crypto, wait and get benefits. Still, there are some key elements you should better enquire before starting HODL (or trading).
Why “HODL”?
HODL is a misspelled word “hold”. It has become a crypto meme after appearing at the post, published on the Bitcointalk Forum on December 2013. Now it is a common term for buy-and-hold investment strategy in the context of bitcoin and other cryptocurrencies.
How To HODL?
Technically hodling is an investing in one-off or regular sums of bitcoin
or altcoin and after that holding the assets for a long-term period (1 year and more). Investors set goals and choose the investment lead time or the amount they want to accumulate.
Before starting to hodl, investors should answer the questions below:
- What cryptocurrencies to choose (making a list of crypto long-term winners) and how to build an investment portfolio (we will talk about it later).
- Whether it will be a single-time investment or recurrent. If recurrent, then whether it will be in a specific time (once a month, a quarter, a year, etc.) or in a special condition (e.g., the desired currencies have reached the cheap or reasonable price).
- When to pull gains out? Reaching a special time or a definite amount? Another alternative — is to hold the whole capital in crypto indefinitely.
Investors form their investment plan, getting answers to this questionnaire.
What Is The Reason To HODL?
Ok, but still, why do people hodl? Even when trading — reaping in the benefits in short-term — seems to be more profitable? Actually, we can name the whole bunch of reasons. People hodl because they:
- want to save and multiply their assets in the simplest way;
- don’t want to spend much time on active investment;
- don’t want to dip into technical analysis or aren’t sure of their analytical ability and skills;
- are confident that their favorable cryptocurrencies have the potential to become long-term winners.
All in all, people choose this strategy because hodling doesn’t require much effort and they have a strong reliance that the price of the cryptocurrency will see a rise in real-value over a long time.
Furthermore, HODL has become a philosophy which helps investors to resist the constrained syndromes: FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt) which occur time and again due to the volatility of cryptocurrency market and hit impressible trades, making them sell their actives.
Where Does The Profit Come From?
The long-term investment strategy is based on the predictions that cryptocurrency would go “to the moon”. So investors buy crypto at one price, hold it while it’s getting more valuable as time goes and then convert it at a higher rate. As easy as shelling peas. For example, hodlers who had bought 1 bitcoin in 2014 at a price of $500 could sell it in June 2019 at a price of $12,000 and made a profit of $11,500 for 5 years.
Why Is The Rate Rising?
The main reason why cryptocurrencies grow in value is the rising public interest of crypto. More and more retail and institutional investors buy into the crypto market. As well as the growing number of ICOs adds more people and companies in the investor list. So, these factors form a positive trend. If we have a look at the capitalization figures of the most popular cryptocurrencies over the past five years, we will see exciting growth. Total market capitalization has risen from $11.36 billion to $455.57 billion between 2014 and 2018, which means an increase of $444.22 billion or 190.27% over the five-year period.
What Should HODL Portfolio Contain?
By the end of June 2019, the market was represented by 2477 cryptocurrencies. Obviously, not every coin or token is worth investing, because even now many of them aren’t showing any activity, so it would be quite strange to expect their rise in price in the future. But even experts aren’t doubtlessly sure on the market behavior of certain cryptocurrencies, even of those which are considered to be winners. Investing, and even hodling, is strongly connected with risk, so investors ensure their assets by diversifying the portfolio. It means that they invest in several cryptocurrencies but not in the one. Some will rise, some will fall, but they increase the chances of getting profit.
But still, how do hodlers choose crypto for investment? There are various tactics. Some of them are:
- choose those coins which have the potential to grow in a year (requires gathering information, expert view, news about upcoming projects, etc.);
- ICOs with tangible projects (look for familiar project’s ICOs or those, which have a workable business);
- buy in a dip (set a desirable low price for cryptocurrency, wait until it reaches this level, buy and hodl hoping it will grow in value).
As you can see, HODL is more than just a long-term investment strategy. It has become a philosophy and a lifestyle for many crypto investors. We hope this article has helped you to understand a little better whether you are a hodler person or not.
By the way, there is one more way to get profit from holding FOIN — it’s staking. You can find out the detailed guide in our article.
