What is HODLing? Advice on how to think long term when HODLing in crypto
in Crypto Tutorials
The crypto space is famed for its volatility, and watching the value of your portfolio shrink by half its size within the space of a week can be a very stressful experience.
But try not to worry. Many crypto traders manage to remain calm in these downturns. Rather than panic and make rash decisions, they take the market in their stride and either wait it out, or find opportunities amidst the chaos.
The no.1 thing that these unflappable traders and HODLers have in common, is experience. Experience comes mostly with time, but there are a few important lessons that we can learn from traders that have the benefit of a long-term perspective.
What is HODLing?
The verb to HODL, in crypto parlance, means to refuse to sell your Bitcoin supply, no matter what happens in the markets.
If you’re wondering what HODLing means, some people think it stands for ‘Hold On for Dear Life’, but the origin of HODL is from a post on the Bitcointalk forum in 2013, where the writer defiantly declared that he was ‘hodling’, despite the recent sell off.
Others replied to the post, also reaffirming their determination to HODL, and turning the word into an instant meme:
In the same post, the determined HODLer says:
'You only sell in a bear market if you are a good day trader or a (dis)illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.'
This declaration pretty much sums up the attitude of HODLers all around the world.
The benefits of holding crypto for the long term include not having to risk capital on trades, having time away from the computer for other activities, and seeing your investment rise in price by massive percentage increases (assuming that you HODL projects with solid fundamental value).
The downsides of HODLing include missing out on chances to ‘increase your stack’ by making timely trades, having to watch the value of your portfolio plummet during bear markets, and exposing yourself to the risk of keeping your cryptocurrency in one place for too long.
The Exodus crypto wallet is a good wallet for HODLers, because it supports many assets in one location, and is updated every 2 weeks to make sure that potential bugs are fixed, and the codebase remains secure and up to date. Also, HODLers can keep control of their own private keys!
How to deal with volatility when HODLing
If you find yourself getting stressed whilst trading, or worrying too much about the price of your crypto assets, then it would definitely be better to simplify your crypto activities, and to cultivate a long-term perspective that makes you feel more secure and relaxed.
Constant checking of prices can make you feel the volatility more keenly. Try setting alerts for when your assets pass certain key barriers, but otherwise making sure your portfolio is out of sight and out of mind.
Decide the aims and objectives of your trading beforehand, and what kind of pullback you would be comfortable with.
Someone who bought Bitcoin at 1,000 dollars would be delighted to see the price rise to 32,000 dollars. They would be positively elated to see the price double up to $64,000. But if the price dropped back down to $30,000, it might look like a disaster to someone who is checking their portfolio and seeing red double digits every day for that particular trading week. For someone who didn’t even realise BTC had hit $64,000, and just saw an increase from 1000 to 30,000 dollars, they would still be totally content. Perspective is everything!
Remember also that even fiat currencies are somewhat volatile these days. Government debt has been increasing significantly since the global financial crisis in 2009, and with global economies having to spend for Covid relief packages, the trend of inflation in fiat currencies is likely to continue. This means that the same salary we earn every month is worth less and less in real terms.
Bitcoin, in comparison, is only gaining in value over time:
In addition to this, banks and financial institutions in the USA and many other countries have now been given permission to provide cryptocurrency services, with the first clutch of large financial institutions moving capital into Bitcoin as a hedge against inflation.
If this industry inversion continues, Bitcoin and a handful of other well-perceived currencies such as Ethereum are likely to become less volatile, as the activities of financial institutions will be heavily regulated, and pension funds or hedge funds that hold Bitcoin will be looking to provide returns over the medium-to-long term.
And no matter how volatile Bitcoin’s price is now, it will, by its very nature, always remain an asset with a finite supply.
How to keep HODLing through FUD
Sometimes, it isn’t just the numbers that make us feel nervous, it’s a change in the narrative.
Everybody was championing Bitcoin as the safe haven against inflation in early 2021, when the price was flying. Now, when the price of BTC has dropped over 100% from its all-time-high, that narrative is not so popular, and the news media prefer to return to the tried-and-tested narrative of crypto bans and China FUD.
Some commentators believe that the media, working together with the ultra-rich, launch coordinated FUD (fear, uncertainty, doubt) attacks to influence the price of Bitcoin. It seems more likely however that the narrative changes like this because journalists see the price falling, and are motivated to find a story or an event to attribute it to. This search for explainable patterns and need to understand life through narratives is human nature, after all.
One practical way to see the reality of the market is to look at what the whales are doing. Once retail investors have panicked and capitulated by selling their BTC at a loss, whales (loosely defined as traders who hold more than 1000 BTC) will pick favourable-looking support levels from which to start ‘bottom feeding’, or ‘buying the dip’.
On-chain analytics companies like Glassnode and Santiment, or whale watching analysts like Whale Alert, can give you insights into investor behaviour that go beyond the media narratives.
Should I keep HODLing my Bitcoin?
So, if you’ve looked into the fundamentals of the crypto space, and are convinced that cryptocurrency is the future of finance, then best to stick to your beliefs and avoid the noise and volatility that comes along the way.
There will always be a mouthpiece that is motivated to convince you that you’re the last one who thinks that crypto has any value, and that you’ll soon lose all of your money.
But there is a quiet army of others out there who are also HODLing through the same emotional rollercoaster. You are not alone.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.