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Published: Nov 10, 2022 11 min read

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As decentralized digital currencies have integrated into mainstream culture, so too has a certain amount of crypto-related slang. It should come as no surprise, then, that the origin of the term “HODL” is even more cheeky than its commonly accepted meaning today: "Hold on for dear life!"

A new spin on an old classic

The idea of holding investments as long as possible is nothing new, but crypto investors are particularly keen on this idea. As crypto traders put big faith in the long-term performance of their favorite digital coin, many intend to rely on it for the long haul.

What HODL means in crypto is essentially what HODL means in stocks, at least in theory. Given the youth and volatility of crypto, what HODL means in practice often looks entirely different in the crypto community. Crypto is not just an asset or commodity for some people; it represents a fundamentally new way of exchanging value.

Just as cryptocurrency presents unique challenges for traders, traders themselves must come to grips with the factors that make trading crypto different from traditional stocks — and it's often with tongue-in-cheek message board humor.

Not just a drunken mistake…

The origins of the acronym “HODL” amount to a whiskey-fueled typo on the Bitcointalk forum in 2013. The 131-page thread encapsulated the simultaneous low- and high-brow intentions behind crypto that mark it as the cultural force it is today.

Starting as a genuine NSFW expression of angst over learning when to hold (sic) and when to sell Bitcoin, the messages eventually became a thoughtful reflection on the finer points of holding vs. selling an asset. HODL became a memetic legend somewhere along the way and is now firmly in the same league as everyone's favorite Shiba Inu.

That explains the language behind HODL — but what about the motivation behind it?

What does HODL mean to crypto traders today?

The preoccupation among Bitcoin traders about whether to HODL stems from the fact that BTC rose from practically nothing to almost $70,000 in little more than a decade. It then dropped from its historic height in 2021 to less than $30,000 one year later, prompting renewed debate on how hard to hold onto your crypto.

Some consider the latest decline simply an opportunity to acquire more, expecting the cryptocurrency to start climbing again as it's done twice before. Others worry that it's a sign of long-term decline, uncertain whether their favorite cryptocurrency will flourish again or if it's time to change teams.

What the previous two slumps tell us is that Bitcoin has undergone three rapid rise-and-fall cycles, gaining and losing many times its value each time. After the first cycle in 2013–2014 (which sparked the HODL meme in the first place), Bitcoin took the same amount of time to return to its original record as it first took to achieve it, signaling a healthy skepticism among new investors and a significant commitment to HODL. The second upward spike in 2018 — the sharpest — led to a significantly slower drop, and those who held on were rewarded with another slightly less sharp rise in a short time.

Bitcoin's third record high in 2021 dropped off more rapidly than the 2018–2019 decline, almost matching the rate of the 2014 decline. If this third cycle is more similar to the first, we have a slower and steadier recovery to look forward to, barring some economic event that fuels support for Bitcoin and leads to steep gains akin to the second cycle. So, what's a HODLer to do in times like these?

To HODL or not to HODL?

The answer depends on whether you consider yourself an investor or a trader in crypto (or somewhere in the middle). Investors mainly engage in trading to build wealth, so the question becomes when to trade crypto, since its innate value is not as important as the value that investors can use it to obtain elsewhere. In contrast to trading, investing is done with a mind toward retaining an asset in the belief that keeping it will facilitate greater wealth or garner some other advantage.

Many view crypto as a guiding light to greater financial stability: they look at cryptocurrency as a pathway to greater financial freedom rather than as a means to acquire something else. At the same time, it's clear that Bitcoin is an asset worth considering for any diversified portfolio, capable of being leveraged for other, more preferred assets.

Most crypto investors fall somewhere in between. Faith in Bitcoin’s utility as a medium of exchange is a prerequisite for using it, but whether an investor has long-term faith in its utility largely determines their readiness for HODLing.

Some investors don't have such faith but still use crypto to facilitate trades when lucrative opportunities present themselves. Others are adamant that the destiny of crypto makes it more useful than Federal Reserve notes, and they emphasize the “dear life” part of the HODL acronym. For all but the most adamant crypto enthusiasts determined to test their faith to the limits, knowing when to hold ‘em and when to fold ‘em is foundational to any trading strategy.

When to HODL your crypto

Even those hoping to turn a quick profit with crypto should deeply consider when HODLing is in their best interests. Like with any traditional stock, selling high and buying low is usually these investors’ primary goal, but it becomes much more nuanced when you begin looking for greater stability rather than simply maximizing short-term gains.

As soon as you analyze an asset’s long-term performance, reacting to the immediate dips and spikes becomes less tempting. You should never forget the foundational principle of keeping assets that appreciate and selling those you believe will depreciate, but there are times when holding an asset is a good idea, even when it lowers.

For example, if your crypto investment has already depreciated below the threshold you originally intended to sell at, there may be little point in trying to cut your losses and sell it before it lowers any further. Your best bet in this case could be to simply retain it no matter what, expecting it to do at least something more for you in the future than it could at that moment.

Once the original HODL thread turned to a more sober analysis (which took years), forum members explained that sometimes it’s just too late to sell Bitcoin, such as when it loses more value than it cost to buy it. Rather than trade it for a loss, these posters wanted to retain it in the hope that it would pick back up in the future.

It’s easier to exercise clear-headed judgment if you’ve heeded the rule of not investing anything you can’t afford to lose. Since Bitcoin was an experiment in reducing central control of a money supply, early participants had little to lose but their time. As it accrued value, it proved its potential, prompting new investors and changing how existing investors looked at it.

Different reasons to HODL

Your own stakes in Bitcoin's performance will relate to much more nuanced factors, such as:

  • Your level of overall wealth
  • How much of your portfolio consists of crypto
  • Your use of crypto in daily life
  • Your investment goals

Investment goals are the biggest factor in determining your own threshold at which holding is or isn't worthwhile. If crypto is just another investment opportunity, HODL is not what you need. That is, of course, unless you have major productive investments already and won't even miss your funds tied up in crypto. In such a case, you can HODL based on the possibility that it will have a truly revolutionary impact on society.

If you're committed to cryptocurrency out of mistrust in Federal Reserve Notes, HODL will be something closer to a default option. In this case, you should continue to think flexibly, considering what you'll do as an alternative to the alternative if a restriction is placed on the cryptocurrency you're relying on.

What will you do then? Switch to Monero? Look for something different altogether? Never neglect the stability of hard assets — and realize there are other "alternative" currency options available.

The index for silver coin fabrication has more than doubled since 2007, and there are now small-denominational gold bills and precious-metals-backed debit cards on the market. Time will tell whether these "alternative" currencies will reach critical mass, but thus far, a rising number of states that have legislated to legalize money of exchange once more have already removed many of the legal obstacles.

From this perspective, it matters less what the USD measure of a cryptocurrency is at any given moment if the former loses most of its buying power and the latter maintains a serious core of committed HODLers. HODL is also an option for those who aren't worried about any of that and simply want to keep a supply of any currency so they can select the one with the most purchasing power at any given time.

In any case, you'll want to invest in your crypto storage and consider off-site security to keep your investments secure. Anything worth HODLing is worth keeping backed up in cold storage. It could all be for nothing if your confidence-backed digits get wiped out, whether they're USD, BTC, XMR or something yet to be invented.

What's holding your attention?

As crypto exchanges brace for a wild ride one way or the other, the topic of how hard it is to hold onto your bitcoin or altcoin has never been more relevant than today. When HODL burst onto the internet meme scene, the stakes were high enough for early investors who weathered the first heart-wrenching boom and bust. Today, the stakes are the veritable life or death of Bitcoin and, with it, the sense of direction for all those seeking alternative means of exchange with their peers.