The Risks and Rewards of HODLing Cryptocurrency: What You Need to Know Before You InvestApr 20, 2023
The term "HODL" is derived from a misspelling of "hold" in the context of buying and holding Bitcoin and other cryptocurrencies. It originated in 2013 when, after a period of high crypto market volatility, the price of Bitcoin rose almost 10 times. This convinced many crypto enthusiasts that Bitcoin would continue to increase in value even after periods of decline.
|Source: Arctic Wallet Twitter|
The main idea of HODLing is that long-term holders can benefit from the potential for big gains over time as the crypto market matures and prices increase. Read the article to know how to HODL safely and avoid the risks.
Benefits & Drawbacks of HODLing
The key point of HODLing is an investor's belief that the value of the cryptocurrency will eventually rise, even after a period of decline. HODLers earn good profit in long-term perspective.
However, it’s important to DYOR crypto assets and trust only proven cryptocurrencies. There are more than 23000 cryptocurrencies and the number is still growing, so even those with revolutionary ideas in their foundations can fail. Therefore, for HODLing, it is better to choose proven reliable cryptocurrencies with a solid track record like Bitcoin, Ethereum, Litecoin, etc.
It’s also important to be aware of potential drawbacks when HODLing crypto assets such as market crashes, missed opportunities for short-term profits, and liquidity challenges.
Ultimately, thorough research is necessary before making any investing decisions.
How to HODL?
To HODL successfully, there are some key steps to follow:
Choose a cryptocurrency for HODLing – do your own research, analyze any project in 6 steps in order to decide whether to invest in it or not.
Get a secure crypto wallet for long-term storage of the cryptocurrency. Pay attention to a non-custodial wallet - nobody but you will have the access to your funds. Take a look at Arctic Wallet.
|Source: Arctic Wallet website|
Buy chosen cryptocurrency (you can do it right from your crypto wallet) and HODL.
Keep calm and don't be paper hands.
Key tips on how to become a successful HOLDer
Becoming a successful cryptocurrency HODLer requires some key attributes and follow-through. Here are some tips to get you started:
Have a long-term investment mindset – crypto markets can be highly volatile, but taking a long-term (over periods of at least 3–5 years) approach can help you ride out the pumps and dumps of the market;
Diversify your portfolio – investing in several cryptocurrencies can help to reduce your risks and increase your chances of profit;
Stay informed – keep up to date with crypto industry news and market trends, as well as any updates on the cryptocurrencies that you hold;
Keep your assets secure – make sure that your cryptocurrency is stored in a secure crypto wallet and never share your private keys with anyone;
Don’t HODL on an exchange - remember "Not Your Keys, Not Your Crypto'';
Stay disciplined - don't be tempted to panic sell during market dips. Stick to your investment strategy and stay disciplined even when prices are low.
The Bottom Line
In conclusion, HODLing is a great investment strategy for those who are confident in their chosen cryptocurrency investments. While it’s true that active traders can make more money faster, HODLers don't have to worry about the stress and time commitments involved with actively trading on the stock exchange. Additionally, they are more likely to maximize their potential profits in the long-term thanks to lower costs and less risk. Therefore, it's worth considering the HODL approach as a viable investment strategy that minimizes costs and maximizes benefits.