HODL Meaning: What Is This Crypto Investment Strategy?

“Hold on for dear life!” or HODL has become a statement every crypto trader and investor has heard at some point in their journey. The phrase, which is an intentional misspelling of the word “hold” has become popular in crypto spaces over the years, and is seen as a sign of perseverance.

The term originated from the Bitcointalk forum in 2013, and over a decade later remains relevant not only as a term but also as a strategy for investing in crypto. So what does Hodl mean? And how can an investor implement a Hodling strategy? We will explore this, and more in this guide.

What Does HODL Mean in Crypto?

Back in December 2013, a user by the name GameKyuubi said the now infamous line “I AM HODLING.” about his investment in Bitcoin, and since then the term has spread like wildfire amongst Bitcoiners and general crypto investors.

The phrase has come to mean “Hold on for dear life!”, and in the market, many often use this when trying to emphasize their commitment to long-term investment in crypto. This phrase is especially prominent during times of high bearish sentiment or during crypto winters.

Crypto winter is the term given to the period when the market is in a slump, with prices plunging significantly lower, or there is a high level of uncertainty in the market.

Binance Founder and former CEO Changpeng Zhao also known as CZ, has been a big user of the phrase, especially in times of FUD (Fear, Uncertainty, Doubt) as seen above.

Hodling is also used during bull runs, with traders using the term to suggest not cashing out too early, and keeping positions open till they go “to the moon”.

Where Did the Term HODL Come From?

As mentioned above, a post on the Bitcointalk forum back in December 2013 was the inception of the term. However, what was the reason behind GameKyuubi making the declaration? During an incoherent tirade, the user said, “I typed that title twice because I knew it was wrong the first time.”

The expression came as he was attempting to confirm his position of maintaining his investment, after Bitcoin began to fall from a peak above $1,100 on December 1, after surging above $100 less than two months prior. He added, “You only sell in a bear market if you are a good day trader or an illusioned noob. In a zero-sum game such as this, traders can only take your money if you sell.”

HODL as a Reflection of Crypto Culture

From being a drunken misspelling to a phrase used by the highest, most powerful cohort of the community, the Hodl meaning in crypto has become integral in the space. This has been particularly the case for maximalists who see Bitcoin, as well as the wider blockchain as being the heir apparent to current financial and economic infrastructure.

Hodlers often view the need to endure short-term pain and uncertainty, in hopes of Bitcoin, or other altcoins having even more astronomical gains, whilst disrupting current FIAT currency systems., and their centralized approach.

A prime example of this is Twitter Founder, Jack Dorsey, who has been a long-term Hodler, and public-back of Bitcoin. Recently, Dorsey’s latest company Block, launched a self-custodian Bitcoin wallet. Dorsey has long believed Bitcoin will one day replace the U.S. Dollar.

The term hodling has also become a meme, with crypto enthusiasts using this in conjunction with popular cultural references, to help captivate a wider audience of hodlers. Here’s our favorite Hodl meme below.

Is HODLing a Good Investment Strategy?

As an investment strategy, Hodlers often cite one example more than any other to emphasize why Hodling is pivotal for any future success in the crypto world, Bitcoin Pizza Day. In 2010, three years before the term Hodl was coined, software programmer Laszlo Hanyecz bought two pizzas for 10,000 BTC. On the same forum that GameKyuubi used for his “I AM HODLING” rant, Laszlo posted  “I’ll pay 10,000 bitcoins for a couple of pizzas… like maybe 2 large ones, so I have some leftover for the next day.”

Based on today’s value of $42,120.21 for one Bitcoin, Laszlo paid over $421 million for the transaction. This folklore has been the backbone Hodling strategy, where investors refuse to part with their crypto, regardless of the financial pains of keeping them, especially during a down market.

Hodling can be a good strategy for traders who do not want the day-to-day volatility of the market and have little time to make fast trading decisions. Like the example of Laszlo’s short-term view of buying pizza shows, these rash decisions can be very costly in the long term.

Like the famous stock investor Jess Livermore once said, “There is a time to go long, a time to go short, and a time to go fishing.”

When Not to HODL?

It is important to note that simply enduring short-term discomfort does not guarantee long-term success. Recent examples of Hodling gone wrong include Terra (LUNA), which became worthless after founder Do Kwon was charged with fraud by the Securities and Exchanges Commission (SEC).

So although the future price of some cryptocurrencies can astronomically rise, it is important to use other strategies, like the fundamentals of a project, when deciding to invest. Otherwise, you may be Hodling an asset that may never recover, after such a huge dent in its reputation.

HODLing vs Active Trading: What’s the Difference?

The difference between Hodling and active trading is simply the frequency of the time you are investing in managing and maintaining your position.

HODLing

Hodlers often hold a long-term outlook on their investment and do not engage with the intraday market volatility. Also, this is a positive in terms of not requiring the investor to spend too much time on their screen, but there could be short-term opportunities lost as a result.

As a Hodler you also do not need to be highly technical when it comes to your trading or investing ability, you mostly just need to ensure you’ve analyzed the market from a longer perspective and believe that the crypto you are Hodling will have fundamental value and impact in the distant future.

Active Trading

If you are actively trading you will need to be more skilled, with more time allocated to the markets.  Active traders can not only buy but also short-sell an asset. This increases how you can make money, as you can also profit when prices are falling.

To be an active trader, you will likely be aware of technical analysis and also follow the current fundamental events that may impact your trading. Ultimately, it is important to know that active trading will require you to invest not just money, but also a significant amount of time, to be successful.

Conclusion

So in the end, what does HODL stand for? Overall, there are many ways to view it, be it a phrase, strategy, meme, or even a movement. Ultimately it appears that with long-term crypto enthusiasts, it is the promise of change that comes with time, and patience.

As a strategy, there is a good case to say that investors who believe in the project of a cryptocurrency should by default be Hodlers. However, this should only come after truly understanding the opportunity and value that the crypto could bring, as Hodling will require a high-risk tolerance to be successful.

Hodling is certainly not for every investor, it requires time, patience, and emotional control, which not many investors have. GameKyuubimay may not still have his Bitcoin from 2013, but the concept he birthed has revolutionized the market, and given traders an investment strategy that can potentially provide great returns.

Frequently Asked Questions on HODLing

What does HODL mean in slang?

In slang, the phrase means to “hold on for dear life!”

Is HODL better than trading?

This depends on the type of trader you are. If you do not want to actively manage your positions and want to wait for more significant long-term gains, then yes it is better than trading.

Who came up with the HODL meme?

GameKyuubi is the originator of the Hodl meme. In a post on the Bitcointalk Forum in 2013 now famously wrote “I AM HODLING”.

References:

• https://bitcointalk.org/index.php?topic=375643.0
• https://cointelegraph.com/news/bitcoin-moon-top-5-btc-price-predictions-2024-beyond
• https://www.coindesk.com/markets/2019/02/02/the-history-of-hodl/
• https://www.coindesk.com/video/jack-dorseys-block-launches-self-custody-bitcoin-wallet-globally/
• https://finance.yahoo.com/news/3-reasons-not-chase-equities-160200526.html
• https://sec.gov/news/press-release/2023-32