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What is HODL in Bitcoin?
The term “HODL” is derived from a misspelling of “hold” that refers to buy-and-hold strategies in the bitcoin and cryptocurrency space.
The term originated in 2013 on a web forum known as bitcointalk. A user named “GameKyuubi” posted a rant titled “I AM HODLING” to express his frustration with bitcoin falling 39% from $716 to $438 over the course of a day.
GameKyuubi’s rant, filled with obscenities and typos, explained why he elected not to sell bitcoin despite knowing the crash would be severe.
In an admittedly drunken keyboard tirade, he wrote, “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.”
He added, “Yeah, you good traders can spot the highs and the lows pit pat piffy wing wong wang just like that and make a million bucks sure no problem bro.”
However, GameKyuubi shared some investment advice that has since appreciated 11,000%.
He said, “You only sell in a bear market if you are a good day trader or an illusioned noob. The people in between hold. In a zero-sum game such as this, traders can only take your money if you sell.”
Shortly after his post, HODL memes spread across the internet and out of the walls of the Bitcoin community. The misspelling eventually translated into “hold on for dear life.”
Today, it remains the default rallying cry each time BTC faces some turbulence.
Understanding HODL As An Investment Strategy
Bitcoin is a volatile asset that is vulnerable to severe price swings. The crypto markets are largely unregulated, relatively small, highly levered (at times), and trade 24/7, 365.
This results in price action that is uncommon in traditional asset markets. For example, stock exchanges will halt trading during dramatic drops by tripping their circuit breakers.
Bitcoin doesn’t have circuit breakers. When it falls, it will continue to fall until enough buyers enter the market. Here are some of bitcoin’s largest crashes to date:
- January 2012: -43%
- August 2012: -56%
- March 2013: -33%
- April 2013: -83%
- November 2013: -50%
- January 2016: -87%
- March 2017: -34%
- May 2017: -33%
- July 2017: -39%
- September 2017: -40%
- November 2017: -30%
- December 2018: -84%
- March 2020: -61%
- May 2021: -51%
While it’s scary to watch your crypto portfolio get cut in half, the best long-term strategy during these drawdowns has been to hold or even buy more.
There will certainly be 50% corrections in the future — they will just be from different heights.
Hodling Through FUD
Sources of fear, uncertainty, and doubt (FUD) can also test a person’s ability to hodl.
While most FUD has been debunked, concerns over damaging government regulation remain a valid critique.
However, the U.S. government is not going to ‘ban’ Bitcoin outright. It’d be an unlikely hill for the Constitution to die on.
The government could regulate or tax the fiat on- and off-ramps to bitcoin. This would be less than ideal for Bitcoin adoption and another stress test for hodlers.
Hodling Special Considerations
When BTC fell from $17k to $3k, 86% of the people that owned it at $17k never sold it. This behavior speaks to the belief in Satoshi’s invention
The highest order of BTC beliefs is found in Bitcoin Maximalists.
Bitcoin maximalists believe that bitcoin will eventually replace fiat currencies altogether.
They believe the fiat exchange rate is irrelevant — 1 bitcoin is 1 bitcoin regardless of its USD equivalent.
The maximalist case results in some astronomical BTC prices because the asset’s total addressable market (TAM) becomes the global monetary system, which is around $100T to $300T.
HODL Definition FAQs
What does HODL stand for?
HODL stands for “hold on for dear life” and refers to the investment strategy of buy-and-hold.
Is HODL good for Bitcoin?
HODL has proven to be a good strategy for Bitcoiners. However, the price of BTC is probably falling if you’re seeing HODL memes on Twitter.
Is HODL better than trading?
HODL is better than trading if you’re an investor with long time horizons. Those who panic sold in previous crashes have missed out on significant returns since.
Bottom Line: HODL Definition
HODL has taken on a life of its own in the Bitcoin community. It’s easy to say but harder to follow when bitcoin is falling off a cliff.
This article is for informational purposes only. It is not intended to be investment advice.