What Does Hodl Mean?
If you’re fairly new to the crypto community, you might have a hard time trying to make sense out of the crypto jargon they use. These terms can put you off the first time you log in to an exchange platform and want to start trading cryptocurrencies.
One of the favorite terms among members of the crypto community is hodling. To hodl means to buy digital coins and then hold onto them even if the market is about to crash.
We won’t judge if right now you’re asking yourself in disbelief why anyone would use “hodl” when they can simply use “hold” instead. Is that a real word anyway?
It has been shown many times before that Bitcoin history is full of fascinating and unpredictable stories. As things go, there’s actually a silly anecdote behind the genesis of hodl too, and a very good reason for you to keep reading this guide and find out everything there is to it.
What’s the Backstory of Hodl?
The reason why “hodl” looks like an unfortunate typo of “hold” is because it really is a typo. It comes from a drunken post made on a BitcoinTalk Forum thread, on December 18th, 2013, where a user under the name ‘GameKyuubi’ misspelled his rather angry outcry, expressing his determination to hold onto his bitcoins in a period when the crypto market suffered a temporary crisis.
The disappointed trader poured his heart out in a self-deprecating rant full of typos:
I type d that tyitle twice because I knew it was wrong the first time. Still wrong. w/e. […] BTC crashing WHY AM I HOLDING? I’LL TELL YOU WHY. It’s because I’m a bad trader and I KNOW I’M A BAD TRADER. Yeah you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a millino bucks sure no problem bro. Likewise the weak hands are like OH NO IT’S GOING DOWN I’M GONNA SELL he he he […] When the traders buy back in I’m already part of the market capital so GUESS WHO YOU’RE CHEATING day traders NOT ME~! Those taunt threads saying “OHH YOU SHOULD HAVE SOLD” YEAH NO SHIT. NO SHIT I SHOULD HAVE SOLD. I SHOULD HAVE SOLD MOMENTS BEFORE EVERY SELL AND BOUGHT MOMENTS BEFORE EVERY BUY BUT YOU KNOW WHAT NOT EVERYBODY IS AS COOL AS YOU. You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell.
If you’re curious to see the original barely-intelligible message, you can read the whole thing on the BitcoinTalk Forum.
One of the key reasons why this hodl situation remains funny is because many of us can recognize ourselves, or our past-selves, as those “bad traders” as GameKyuubi calls himself, those naive crypto beginners with no trading strategy whatsoever. Most of the time you either won out of pure luck or recklessly lost everything.
That’s why it’s not surprising that “hodl” was immediately turned into a meme that caught the Internet by storm. It was recreated and appeared in all sorts of contexts, from the countless Braveheart movie memes to Game of Thrones’ character Hodor and his endless hodl chanting. It even ended up being printed out on some crypto fans’ T-shirts.
The typo caught on with the Bitcoin community, and was later used as an acronym too: Hold On for Dear Life. We all know that feeling, right?
What’s the Philosophy Behind Hodl?
There are two main types of trading strategies: short-term and long-term trading.
Short-term trading strategy is used by traders who purchase cryptos but don’t hold onto them for a long period. This means that you can make large profits if the currency is highly volatile and has large trading volumes but you can just as easily lose money if the price goes down quickly. Another disadvantage is that this type of trading is better suited for large investments.
In contrast, long-term trading strategy appeals to traders who like to store their coins for months, even years, in case their price goes way up. In other words, they hodl. They have strong faith in the long-term value of their chosen cryptocurrency, and patiently hold their position regardless of the current market situation.
Sometimes, this can be disastrous, especially for novice traders, who like ‘GameKyuubi’ are more likely to miss out on a good opportunity to sell their coins or will sell them prematurely because they got too excited at the first price increase and lack the experience to see the red flags.
On the other hand, seasoned traders already know the potential risks and are skillful at predicting price trends and patterns. By holding onto their cryptocurrencies, they also avoid the temptations of FOMO (Fear of Missing Out) and FUD (Fear, Uncertainty, and Doubt).
FOMO is when traders act impulsively and buy cryptocurrencies when they have the highest prices because they’re afraid they’ll miss their opportunity by waiting any longer. FUD is often spread on social media and can cause the price of a coin to drop because of general fear with traders selling low.
Is Hodling Recommended?
We already mentioned that even though beginners won’t necessarily lose anything by hodling, experienced traders who have knowledge of the market can leverage this strategy even more.
The risk of selling your cryptocurrencies at the slightest price increase has to do with more than just the normal short-term price swings. The long-term volatility of digital assets, to which even Bitcoin is liable, poses an even greater threat. In such cases, timing the market is almost impossible.
Bitcoin has had frequent price fluctuations ever since its launch in 2009. The first major one happened in 2013 when Bitcoin received a wider acceptance from retailers, and its price jumped from around $200 at the end of October to a surprising $1,120 by December.
By the end of the year, it had already gone down for about 39%, followed by a slight increase, only to drop down by 70% in February 2014. The price remained relatively low until 2017 when it went back to $1,000.
In the course of the last three months of 2017, Bitcoin’s price went from $5,000 to $10,000, to almost reaching $20,000 in December. Those who belonged to the hodling group, most likely sold their coins in that timely moment. However, by April 2018, Bitcoin’s value eroded away to $7,000.
The uncertainty caused by such volatility leaves little room for more successful trading strategies. For now, hodl seems like the most simple and reasonable option.
Disclaimer: Digital currencies and cryptocurrencies are volatile and can involve a lot of risk. Their prices and performance is very unpredictable and past performance is no guarantee of future performance. Consult a financial advisor or obtain your own advice independent of this site before relying and acting on the information provided.