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The first time you see “HODL” when someone is discussing cryptocurrencies the word causes you to stop reading. You think: “Is it a misspelling?” Well, yes it is – at least it was mistyped originally. Now, rather amusingly, HODL has spawned a life of its own. It has evolved to represent a long-term trading strategy and philosophy for crypto investors.
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HODL has become an acronym (or even backronym) for “hold on for dear life”, meaning that even when investors are in the deep red with their cryptos they should not buckle under pressure and sell, driven by the belief that they will, ultimately, reap great rewards, once mass adoption has been achieved.
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Quartz heralded HODL as one of the most important terms in crypto culture in 2017, describing it as a determination to “stay invested in bitcoin and not to capitulate in the face of plunging prices”.
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There is certainly great potential of HODLing as an investment strategy, and not selling while under pressure, as history shows us – and not just in the cryptocurrency world.
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One of the most notorious examples of failing to HODL happened in the mid 1970s when Ronald Wayne, Apple’s third co-founder – alongside Steve Jobs and Steve Wozniak – sold his 10 per cent stake in the then-start-up back to the other two co-founders for $800.
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In August 2018, Apple achieved the historic milestone of reaching a market capitalisation of $1 trillion. Had Wayne adopted a HODL mentality his Apple stake would be worth around $100 billion today.
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It is impossible to predict the future, but Jay Smith, one of eToro’s most recognisable Popular Investors (whose trades can be copied by others – as can anyone’s on the platform), believes staying strong will reap the biggest rewards. Full-time trader Smith – describes his trading style as “fundamentals, future and HODLing”.
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“I firmly believe that cryptos will change the world, replacing stock markets, most currencies and powering everything from machine-to-machine payments and the Internet of Things through to streaming media, prediction markets, governance systems, voting systems, even potentially the internet,” he continues. “That being said, there is a long way to go, we are in the very early stages for most of these areas.”
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When the value of cryptos falls, many investors double down – effectively strengthening their commitment to a course of action that is potentially risky – because the prices are so low. As with HODLers, those who keep investing see the long-term benefits of cryptos.
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Despite the bear market of 2018, eToro reports users have invested more in bitcoin, XRP, and a range of other cryptos available on the platform – just see the market sentiment (image taken on November 30, 2018).
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**This is not investment advice or an investment recommendation.**
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If you have gone all in on cryptos and are waiting for the arrows to turn green, rather than red, it might be a good idea, during a bear market, to consider investing in other asset classes. By diversifying your portfolio this approach will spread your overall risk.
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On eToro there are over 1,200 financial instruments, across six asset classes, on offer: cryptocurrencies; exchange-traded funds(ETFs); stocks; indices; commodities; and currencies. There are other ways for users to invest with eToro, in addition to manual trading. The innovative CopyTrader tool allows clients to copy the trades of top investors automatically. Users can view and copy anyone with a profile in a straightforward way, and expand their portfolio using CopyTrader while still using an individual strategy.
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Another option is CopyPortfolios™: eToro offer various portfolios including in cryptos, technology and the best-performing traders. These allow users to invest in multiple markets or traders based on predetermined investment strategies.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
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**Cryptoassets are unregulated and can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptoassets is not supervised by any EU regulatory framework. Past performance is not an indication of future results.Your capital is at risk.This content is intended for information and educational purposes only and should not be considered investment advice or investment recommendation.This article has been written in association with eToro**
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