Blog Crypto HODL Meaning: The Path to Crypto Profits?

HODL Meaning: The Path to Crypto Profits?

date May 16, 2022 time 5 min read 569 views

Every crypto investor wants to secure huge profits, but they don’t all agree on how to get there. One of the most popular strategies is known as “HODLing.” But what is the meaning of HODL, and is it a strategy you should be paying any attention to in the light of the recent market volatility?

The term HODL has been used almost as long as bitcoin, but its origins might surprise you.
The term HODL has been used almost as long as bitcoin, but its origins might surprise you. (Source: Unsplash)

When you first hear the first term “HODL,” you might assume it’s a typo, but this term holds a very special place in the hearts of all crypto enthusiasts. It sums up the investors’ commitment to holding their assets over the long term to support the projects behind them—all in a single word. But what is the actual HODL meaning, and is it an approach you should follow?

Ultimately, there are different strokes for different folks, and HODLing isn’t right for everyone. Let’s run through what it is and the pros and cons of adopting this crypto investing strategy.

What’s the meaning of HODL?

The HODL meaning is straightforward enough to explain. It simply describes the decision to hold cryptocurrencies over the long term after making a purchase, instead of trying to secure a quick profit.

It’s an investment strategy that’s generally used as an alternative to day trading, which involves trying to play the market (aka selling when prices are high and buying when prices are low). The idea is very similar to the buy-and-hold approach many people follow for stock market investing, but while traditional investors only aim for conservative profits, most crypto investors hope on some level that their chosen coin will achieve crazy returns.

The HODL meaning is all about committing to a crypto over the long run.
The HODL meaning is all about committing to a crypto over the long run. (Source: Unsplash)

Although the idea of HODLing might not sound particularly revolutionary, it has more meaning in the context of the crypto space. Many have criticized the cryptocurrency market as being a bubble that’s destined to burst, a Ponzi scheme, or simply full of “idiots” who use trading as a form of gambling. There are also plenty of people who do see crypto as a get-rich-quick scheme, and this group has grown over the years as crypto has gained a reputation for the aforementioned crazy returns.

HODL is partly a rebellion against this thread of thinking and a way of proving there’s more to crypto than trying to make a quick buck. Really, HODLing isn’t just about money—it’s a way of showing that you’re in the blockchain market for the technology and the principles behind decentralization.

It’s also a word the community can rally behind during crashes, pulling together in the hope better (and more profitable) times will come again.

Where did HODL come from?

However, when it comes to the origins of the term, there are some different ideas floating around. 

Some say that it’s an acronym for “hold on for dear life,” which makes logical sense considering it pretty much sums up this idea. Yet most agree that the true history of the phrase is when a forum user made a typo that contained a typo, saying “I AM HODLING.” In fact, you can still find the original post today.

For whatever reason, the misspelling really stuck around, because it’s now become a staple of the crypto dictionary and many memes.

Should you HODL? Pros and cons

Now we’ve established the meaning of HODLing is, there’s just one question left. To HODL or not to HODL? Let’s look at both sides.

Pros

Warren Buffet once said that “time in the market beats time in the market.” When you try to predict what prices are going to do next, you’re essentially gambling. That means there is potential for huge wins, but you also risk significant losses if your predictions turn out to be wrong. Even investing experts frequently get things wrong, so why do you think you’ll be the exception to the rule?

HODLing can be a solid strategy, but it isn’t right for everyone.
HODLing can be a solid strategy, but it isn’t right for everyone. (Source: Unsplash)

HODLing avoids this issue—you don’t have to try and buy or sell at the “perfect moment,” you just have to choose a project that will increase in value over the long run. And prices do tend to trend upwards over time, especially among the more popular cryptocurrencies (although there’s no guarantee this will always happen).

Another perk of HODLing is that you’ll avoid the fees associated with constant trading. Crypto exchanges take small charges every time you buy or sell a cryptocurrency, and you’ll incur even more fees if you want to transfer the holdings to a wallet. Over time, these can really add up, but HODLing will keep your fees to a minimum.

On a similar note, you may save on capital gains tax (although this will likely only apply to those investing serious amounts). The IRS imposes a lower rate of the tax on assets you’ve held for more than a year—this isn’t a point to ignore considering cryptocurrencies typically aren’t compatible with tax-advantaged accounts.

Cons

On one level, it might sound harmless enough to hold an asset over the long run. But when people mention the statistically-proven advantages of buying and holding, they’re talking about the stock market—something we have more than a century of data for, including multiple crashes. In comparison, there’s only just over a decade of this data for crypto (bitcoin was launched in 2009), so there’s no way of truly knowing if prices will trend upward over the long run.

Also, committing to the HODL path means that you could miss out on some of the opportunities to earn money. Short-term trading might be risky, but considering the frequency of crashes and recoveries in the crypto market, many find it irresistible. This comes down to your risk tolerance.

Also, being too starstruck by a single cryptocurrency that you want to HODL over the foreseeable future can blind you to the harsh realities of the crypto market. We mentioned earlier that prices tend to trend up over time, but there have been many cases where this didn’t happen. Just look at IOST coin, which has plummeted since its launch in 2018. There’s no absolute guarantee the crypto market won’t become a short-lived fad worth nothing that everyone laughs off in 2100 (although we’re certainly hoping this isn’t the case).

Buy MCT token today

Now you know what the HODL meaning is. But did you know there are more ways to make money in the crypto world than either HODLing or day trading? 

You can access many of them through MCT token. The token allows you to convert between cryptocurrencies and access all kinds of other financial products with one coin, including investing and staking. 

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  • Up to 12% APR from staking
  • 20% more interest from MyConstant investing products 
  • 20% reduction in borrowing fees on MyConstant 
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  • 50% discount on crypto swap fees on MyConstant 

It’s now available on PancakeSwap for US users, and everyone else can access it directly through MyConstant
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George Schooling

George Schooling

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