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DataDrivenInvestor
Dec 15
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“Crypto investors quickly retrofit HODL as an acronym for “hold on for dear life,” an encouragement to other crypto investors not to sell when prices fall. The meme also acknowledges novice crypto investors that they are not skilled enough to profit from short-term trades amid the notoriously volatile crypto market.” — Forbes.
No, it’s not like “Hold the door.” That was a Games of Thrones (GoT) thing.
This is an investment strategy. Many say there are three, HODL, trade, or stake. But there’s nothing saying you can’t HODL and stake!
This YouTube video from April 2020 is an excellent example of why you should HODL. Bitcoin was selling for $6906 then.
Investors used to say “buy and hold” was the method to make money on stocks and mutual funds.
“Our favorite holding period is forever.” — Warren Buffet.
Another of his quotes prop up the HODL philosophy for those who bought at or near a coin’s all-time high (ATH) is this one also from SARWA:
Imagine if you had bought one share of his company, Berkshire Hathaway, for $910 in 1983 and held it until today. It would be worth $468,500.00. Granted, many stocks do not have that type of growth.
However, some do regular splits to keep their price low. When a split occurs, say a 2-for-1 split, the shareholders get two shares for every one share they hold.
Many people buying crypto for the first time do so because they heard and believed the hype on the internet. Many Reddit groups, known as subreddits, plan and execute “pump and dump” schemes.
First-time cryptocurrency investors get the idea they will get rich from the altcoin of their interest. The truth is the hype of celebrities and social media groups rarely last.
Changpeng Zhao, more commonly known as “CZ,” won a few Bitcoins playing poker and started accumulating it and other cryptocurrencies. Word is he even sold his apartment in Canada to buy cryptocurrency.
Bloomberg’s Billionaire Index had his worth around $96 billion in January 2022. It could be more or less since the crypto market has declined severely since then.
However, CZ did not sell his crypto. He used it to build the largest exchange in the world, Binance.
A similar case is the Winklevoss twins, though they had millions to invest from Zuckerburg, who reportedly stole their idea for Facebook when they hired him to code the project. He settled for $110 million, a mere pittance of what Meta is worth now.
However, they bought BTC with it and started the Gemini exchange, which is reportedly having financial difficulties, but Bloomberg estimates their worth at about $5 billion.
One investor bought $50 worth of the meme coin Shiba Inu when it was first released and made $8 when it reached an ATH in 2021. However, there’s no evidence he sold either. Word is he’s still HODLing.
On Investopedia, you can read other stories about crypto millionaires like Satoshi Nakamoto, Brian Armstrong, Michael Saylor, and others.
Many exchanges have taken it on the chin since the Three Arrows Capital (3AC) hedge fund collapsed. At one time, they managed over $10 billion in investor funds. It is rumored they were heavily invested in Terra LUNA and UST before the collapse and that the fund was grossly mismanaged.
Several (around 20) exchanges lent hundreds of millions to this now-defunct hedge fund. Many exchanges like Celsius and Voyager have declared bankruptcy, while others are limping along, HODLing and hoping for a quick recovery.
There’s also evidence of it going the other way. Suppose someone sold their family home and bought one Bitcoin last November at its ATH of around $68,000. That coin would be worth $17,700, a paper loss of $50,300. Of course, they would scream HODL loud and clear, hoping for it to establish a new ATH in the next bull run!
Typically, when a coin is newly listed on a major exchange, such as Kucoin, Coinbase, Binance, or another, it climbs rapidly due to the fans of the altcoins which may have been waiting for it to list and some “crypto whales,” make their purchases.
Crypto whales refer to large holders of cryptocurrencies. They can be individuals or organizations who often own more than 10% of crypto. — Cointelegraph.
Some exchangers even charge for membership to exclusive “clubs” where they get notifications of new listing, some of those memberships cost more than $10,000. Of course, there are gold, silver, and bronze memberships that cost more.
Of course, day traders, with the knowledge of the listing, buy the coin on other exchanges before the listing. They have established buy and sell points, some based on the information gained from reading subreddit chats before the listing or scheduled pump.
The author of this text will stay anonymous on my part, but the author was concerned that their most recent pump only gained 400%, and their aim was 2,000%.
“We decided to pick the coin that had the biggest dip in order to allow our members to buy at the cheapest possible price and maximize the amount of profits…
In the next pump we will make sure to pick a coin that we know for sure can be pumped to more than 2000% and our team will make sure that we will reach that target once again by injecting a massive amount of USDT during the pump after our members had bought already.”
This is a risky business. Also in the Forbes article is this comment by Ben Gagnon, the Chief Mining Officer (CMO) for Bitfarms (BITF).
“To HODL is an acknowledgment that while a lot of money can be made trading short-term volatility, a lot of money can also be easily lost.” — Ben Gagnon.
Planning or executing a “pump and dump” is “sketchy” at best and could be illegal.
Profiting from it is just intelligent trading. IMHO. Although I am not a financial or legal advisor.
You see, this is what you are up against. The group mentioned above has 56,700 members. So, it could make dramatic, albeit temporary, gains when they decide to pump a coin, especially when day traders and whales catch wind of it.
You’re sitting there watching this altcoin go up and up. It might be at its ATH or at the group’s trigger point when you decide to buy. You buy a bag full thinking you’re going to be rich, but by then it might have already reached the selling point.
Once the coin reaches its sell point, they, the day traders, and some of the whales will sell, and you’ll be left holding the bag, hoping it will make a comeback. Perhaps it shall, someday.
Hence, the term HODL. Some investors use it as a mantra to boost their confidence. Who would want to sell a bag of coins that suddenly took a huge dump after buying it? So, they tell the world, HODL, it will be back.
Whether you decide to invest in cryptocurrency, stocks, gold, or another, you must do something after setting aside an emergency fund. Some say to pay off the high-interest credit cards first, which has merit, but if you just leave your money in a savings account, you will lose.
A bank will pay you around 0.1% on savings accounts less than $10,000. That’s nothing compared to the 7.5% inflation announced on 12 December, eating up your savings.
The wife and I have been buying BTC and ETH with DCA and moving it to our Ledger Nano X since 2017, when we lost about $7,000 in a BTC Ponzi scheme. To be honest, we didn’t know about the Ledger until 2020.
We also buy $50 worth of various altcoins we research, and I write about, moving those to our Ledger. The only reason we leave coins on an exchange is to take advantage of locked staking, which can reward you handsomely.
It’s still risky, so choose an established exchange like Coinbase, Binance, or Kucoin. Yes, I know FTX seemed very reputable too.
If you’re a new investor, here is where I started:
Which coins are you HODLing? Let me know in the comments.
medium.datadriveninvestor.com
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DISCLAIMER: This article is for entertainment and informational purposes only. It should not be considered financial or legal advice. Not all information will be accurate. I am not a financial adviser, and you should consider anything I write as informational and friendly banter to show you what is possible if you invest your money in these vehicles. However, there are no guarantees. Consult a financial professional before making any significant financial decisions.
Note: This post contains affiliate links. Read my disclosure statement for additional information.
Stephen Dalton is a retired US Army First Sergeant with a degree in journalism from the University of Maryland and a Certified US English Chicago Manual of Style Editor. Also, a Top Writer in Nutrition, Investing, Travel, Fiction, Transportation, VR, NFL, Design, Creativity, and Short Story.
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