You scroll through social media and you come across someone who says they are “HODLING” or tells someone else to do “HODL”
HODL = HOLD
“HODL” is a cryptocurrency related slang that stands for the word “hold” misspelled. It often refers to holding crypto assets that you own for an extended period of time, even during a highly volatile market movement. “Hodl” is intended to encourage people not to sell impulsively when a cryptocurrency drops or rises dramatically in order to become very profitable to sell.
“HODL” also acts as an acronym for “Hold on for dear life.” You will often see the term in various cryptocurrency forums and social media circles. Some influencers even encourage their followers to “hodlen” various crypto tokens as part of their long-term strategy.
The Origin of Hodli
The word “hold” has long been used in finance as part of the buy-and-hold strategy. This investment method involves buying a financial asset and holding it indefinitely. This is related to the view that an investor should not be guided by short-term market movements and should look at the long-term view.
The term “HODL” comes from a post posted on the cryptocurrency forum Bitcointalk in 2013, shortly after a move by the Chinese government caused the price of Bitcoin to fall drastically within a day. One intoxicated member typed a message titled “I AM HODLING” in response, detailing his general lousy luck with investing and his desire to preserve his wealth going forward.
Shortly after that incident, the term “hodling” became commonplace in the cryptocurrency enthusiast community. It made its way into memes and on social media and became a way to signal a token owner’s desire to hold onto their assets.
“Hodl” and cryptocurrencies
The biggest reason why “hodl” has become such a popular term is the general volatility of cryptocurrencies’ prices. Many cryptocurrency tokens, even relatively stable ones like Bitcoin and Ethereum, often have highly volatile market swings. The cost of these tokens can drop 100% in one month and increase by 300% in the next few months.
Cryptocurrency prices are also sensitive to the movements of whales (a term for people or organizations that own a very large amount of a particular token). If even one whale decides to sell a particular token, they can cut the price completely.
“HODL” is seen as a way to counter these price swings. A shareholder who follows the strategy does not sell, even if the market changes. Many people who do “HODL” don’t even pay close attention to the daily market movement of cryptos, preferring to look at their tokens in the long run.
Why do people do “Hodl?”
One of the biggest reasons people view ‘hodl’ as a viable strategy is their belief in the underlying technology and the use case behind it. Bitcoin and most other cryptocurrencies are based on a technology called blockchain, which has many uses, including a way to make secure and anonymous payments over the internet. Some people believe that Bitcoin is the future of all financial transactions rather than fiat currencies like dollars and euros.
For many cryptocurrency owners, “hodling” is an intriguing prospect. The value of a single Bitcoin has fallen from less than a dollar when it first came out more than a decade ago, to five-digit numbers in recent years. Despite high market volatility, many cryptocurrency owners believe in the long-term financial prospects of Bitcoin and other tokens. At the same time, many other people believe that buying cryptocurrency is equivalent to gambling.
Many people also believe that the values of cryptocurrencies are better when people buy and not sell their tokens. That’s why “hodl” is such a common term in the community – it’s often said to novices who may be afraid of owning such a volatile asset. “HODL” combats what crypto users call “FUD”, which stands for “fear, uncertainty and doubt”. FUD can encompass everything from naysayers to governments to negative press on the issue of cryptocurrency.
“HODL” is generally only used to refer to cryptocurrencies and not to other assets. If you want to use the term ‘hodl’, reserve it for conversations about these tokens, otherwise you could be misinterpreted.
If you come across people telling you to ‘hodl’, chances are you’ve come across cryptocurrency enthusiasts. Make sure to use common sense when making critical financial decisions, such as buying a cryptocurrency. Never invest more than you can afford to lose.
If you want to learn more about cryptocurrencies, start with our guide to Bitcoin.