What is HODL and Its Purpose in Cryptocurrency Investment
Rancakmedia.com – In this article we will discuss about what is HODL In crypto investing, for those of you who are curious about the meaning, history, advantages and disadvantages, and why so many investors do HODL, see below.
The term HODL is indeed a promising method for certain types of investors, therefore HODL is not just a term, but an investment strategy that is worth considering.
What is HODL
In the world of digital money, the term "HODL" refers to an investment method that involves buying an asset and holding it for a long period of time.
Short-term volatility in cryptocurrency markets often necessitates the use of HODL strategies to protect investors from further losses. The goal of this strategy is to make money in the long term.
The term HODL actually comes from the word "hold" or "hold", then it is assumed that it stands for hold on for dear life.
This certainly fits with the concepts included in the HODL strategy, so what is holding? Hold or HODL is a term used in the bitcoin world to denote an asset that you may not sell any current assets.
Maintaining assets in the bitcoin world is not as easy as it seems. For example, you acquire bitcoin assets. It is possible to sustain losses or hold on to a stock if its price drops. As a result, HODL is a viable option in this strategy.
In general, to maintain the assets owned, a cut loss will be carried out. This is done so that losses do not increase with the expectation that prices will continue to fall. However, the opposite is true with the HODL strategy.
People practicing the HODL strategy think that in the future the price of their asset will rise again. In pricing to use the HODL strategy, one must have confidence in the future price increase once the asset price reaches the buy price.
Origins of Use of the Term HODL
When you first hear “HODL strategy”, you might believe it's a typo. A bitcoin forum is the scene, which took place in 2013.
The incident occurred in 2013 on a bitcoin forum. At that time, a forum user named Game Kyuubi made a post with the sentence “I'M HODLING” adhering to a buy-and-hold strategy.
The sentence is a typo because it should be “I'M HOLDING”. However, the sentence is discussed and continues to be confirmed as a term that is not wrong in various forums.
In fact, it was just an expression of disappointment because of the decline in the price of bitcoin after having risen drastically.
During that time period, in 2013, the bitcoin price increased from $15 to $1.100 in the period January to early December.
However, the bitcoin price then plummeted in mid-December 2013 to 716 dollars. This incident annoyed many people and caused Game Kyuubi to post its dissatisfaction.
Despite the fact that the sentence “I AM HODLING” is wrong, Game Kyuubi shows the correct action.
Finally, the bitcoin price hit a record high of $19.167 at the close of 2017 according to data. HODLers may be confident that the bitcoin price, which reached $58,000 in early 2021, will not drop below that level.
HODL Strategy and Philosophy
The HODL strategy is built on the philosophy of not trading assets based on short-term price fluctuations, as the Kyuubi Game does.
The HODL strategy is based on the idea that holding an asset has a lower potential for loss than trading it quickly.
By implementing the HODL, trading will prevent fear of loss (FOMO) and fear, uncertainty, and doubt (FUD).
When it comes to cryptocurrencies, the world of missing out (FOMO) will cause investors to become overconfident and overpay for the asset. As a result of the fear and reluctance generated by FUD, companies will be more willing to sell at low prices.
Instead of “Staying for a Distinguished Life,” it might be more wrong to hold a “Staying for a Better Life” HODL to emphasize the need to hold onto these assets.
Advantages and Disadvantages of Using HODL
If an investor believes that his crypto assets will increase in value in the future, then he can use the HODL strategy. In this case, investors do not pay much attention to price fluctuations in the short term.
However, investors need to study the fundamentals of their crypto assets, as well as their investment objectives. It is very important to determine the investment strategy that will be used.
However, the HODL strategy does not guarantee a 100 percent return. Investors need to carefully consider the possible advantages and disadvantages of using the HODL strategy before implementing it.
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Investor's Purpose of Doing HODL
The main goal of HODL players is to make long-term profits while encouraging hodlers not to sell their assets.
That way, they can avoid the risk of buying expensive and selling cheap which is often experienced by beginners. The reason is simple: HODL can make asset prices higher.
HODL can be likened to a commodity stockpiled by middlemen. When the number of goods available on the market decreases, the price will tend to increase along with the increasing demand.
However, risks can also occur, such as the existence of alternative or substitute products. Therefore, investors must pay attention to risks, such as changes in regulations or public opinion, even though HODL seems safer.
Keep in mind that HODL can provide large long-term benefits, but it still requires careful calculation and consideration.
Otherwise, this method can lead to big losses. Therefore, HODL cannot be done haphazardly or simply because you want to hold assets for a long time, but must be based on a mature investment perspective and strategy.
HODL is a term used in the bitcoin world to denote assets that you may not sell any current assets.
Thus the article about what is HODL and its goals in Cryptocurrency investment, I hope the article above can be useful and helpful for all of you.