A helpful guide to the HODL Meaning in crypto.
If you’ve been in the crypto world long enough, there are some terms that you have inevitably come across and one of these is HODLing. It is a popular staple of crypto forums, tweets and is firmly embedded in the crypto vocabulary. But what does it means?
‘HODL’ is a misspelling of the word ‘HOLD’ and was first introduced in December 2013 on bitcointalk forum. It was used by forum member GameKyuubi, who posted “I AM HODLING,” which was part of an error-filled message discussing his decision to hold on to his bitcoin as he was not a skilled day-trader.
The HODL meaning is also thought to mean ‘Hold on For Dear Life’ with regards to cryptocurrency. Simply put, HODLing is the act and philosophy of acquiring cryptocurrency and refusing to sell it long-term. Some HODLers are doing so in anticipation of their cryptos reaching a certain price and some believe that cryptocurrency will replace fiat currency and are simply waiting for such a time.
While HODLing might seem rather straight-forward, there are a number of things to keep in mind beforehand, which we will explore in our guide to HODLing below:
Is HODLing right for you?
While HODLing is fairly popular across the cryptocurrency sector, it might not be for everyone. Before you even begin, it is important that you ask yourself if HODLing is for you. There are a few reasons why people HODL; the desire to sell at a very high price in the future, the belief that crypto will replace fiat currency, or the desire to keep crypto as savings.
First, ask yourself if you fit into any of these categories. If you believe that bitcoin, for example, will hit an incredible price in the future, are you willing to wait several years for this and HODL even when the token makes substantial gains? If a quick profit is more of your thing then HODLing might not be for you.
Are you convinced that cryptocurrency will take over from fiat currency? HODLing would be your best bet if you are convinced. Remember that HODLing is a long-term commitment by its very nature and if you are not fully on board then it might not be for you.
Choosing a cryptocurrency
Now that you’ve decided to HODL, you need to decide what cryptocurrency you want to do so with. Many of those who HODL choose a wide range of different tokens and store away while watching the price and this might be a good idea.
Before you purchase the tokens, conduct some research on their price history and the blockchain behind it. You might want to avoid very new tokens with little information surrounding them.
Make sure you have a healthy mix of more established ones like bitcoin and newer and promising ones. Once you have decided on which tokens seem the most promising, you can move on to the next step.
Choosing an amount to HODL
After you have decided on the token(s) you want to HODL, your next step is to decide on the amount you want to HODL. This is based on a number of factors. Your currency budget, of course, plays a part and so does the amount of money you intend to make (assuming you are HODLing for speculative reasons).
Decide based on how much of each token is worth at the moment and how much you believe they will be worth by the time you are finished HODLing and buy accordingly. Keep in mind that HODLing is an ongoing activity and you can slowly build up your stock of cryptos as you go along.
Choosing a wallet
Few things are as important to a cryptocurrency user as the wallet they opt for. This is because wallets, if compromised, can be hacked and stolen from and the last thing you want is for your HODL stash to be taken away. There are different types of crypto wallets such as cold wallets, hot wallets, and web wallets. All are suitable options depending on your needs but a cold wallet is highly advised for anyone who is HODLing.
This is because they are not connected to the internet and so are difficult to hack into. Another recommended wallet for HODLers is timelock wallets. Timelock wallets are wallets that hold cryptocurrency and cannot be opened until a specified time or block height. This can remove the temptation to spend your tokens prematurely.
One note of warning, however, is that you should never keep your cryptocurrency on the exchange from where you purchase them. Exchanges are particularly susceptible to hacks and there is no guarantee of reimbursement.
Choosing a ‘sell’ requirement
While HODLing is long-term, it is not expected to last forever and before you begin, it is best that you define under what circumstances you will sell or begin spending your cryptocurrency. If you are purchasing tokens for speculative reasons, you will need to decide your ‘sell’ requirement. For example, suppose you purchase bitcoin at $10,000 per token, you need to decide what price you will sell at.
If your sell requirement is $20,000, that means that you plan to HODL until the bitcoin price reaches $20,000 per token and not before then. This is a common tactic for those targeting long-term profit from cryptocurrency and do not intend to sell during short-term bull runs. If you are HODLing in the hopes that cryptocurrency will replace fiat currency, then you need to determine what situation qualifies (cryptocurrency being accepted by major retailers, for example).
After this is set, it is important that you monitor the price of the tokens you are HODLing as well as any developments within the industry so that you know when it is time to end your HODLing. One way to do this is to set up price or news alerts.
HODLing is a very long and committed effort to cryptocurrency investing that might not be for everyone. If you do decide to do so, however, follow our helpful guide to have the easiest journey possible.
Image via Shutterstock, Writer Tokoni Uti