Why HODL is the Best Strategy for Bitcoin Trading

CoinExpert

CoinExpert

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Jun 17, 2018
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Six months ago, bitcoin price reached the level of $ 20,000, and today its jump to $ 7,000 is already a reason for joy. In such conditions it is difficult not to lose faith in the bright future of the first cryptocurrency. In this article we will tell whether it is worth implementing a long-term investment strategy, given the extreme volatility of the cryptocurrency market.

Warren Buffett once said,

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

We all know that Buffett is not the hottest fan of Bitcoin, or, more precisely, he hates the coin. At the same time, he is probably the best investor humanity has ever seen hence we should listen to him. So, how to apply his investment strategy on the cryptocurrency market?


hodl-jpg.145


What is a HODL?

For the first time, the term HODL appeared in one of the BitcoinTalk posts in 2013. Its author was a member named GameKyuubi, who created the thread “I AM HODLING”. Apparently, the author was drunk and wanted to emphasize the fact that he was holding his bitcoins and does not intend to sell them, despite the serious drop in prices that had just happened. Since then, writing this word with a mistake has become especially popular among crypto community. When someone claims that "he is hodling" or proposes "to hodl," it means that he believes in his crypto currency and hopes to earn from it one day, if not today.

This is the genesis story of the best investment philosophy for crypto community — buy and hold.

Hold Your Horses
Let's go back to Warren Buffett's quote: "If you do not want to own an asset for 10 years, do not buy it even for 10 minutes." Clearly, he was talking about the stock market, but, as we have mentioned above, this wisdom is applicable to other kinds of assets.

Let's return to the GameKyuubi's message. From September to December 2013, bitcoin went up from $ 130 to $ 1,000, and if he sold it on the date of publication, on December 18, 2013, the price would be about $ 650. Let's return to the GameKyuubi's message. From September to December 2013, bitcoin went up from $ 130 to $ 1,000, and if he sold it on the date of publication, on December 18, 2013, the price would be about $ 650. At the time of writing this article, he would have received 6256% on his $ 100 invested. Everyone would be happy.

All markets come through periods of rise and fall of prices. But the cryptocurrency market stands out against the general background, and it is investors with a long-term strategy overcome periods of decline. The "buy and hold" strategy has always provided the greatest return in the long term, and the best world investors are campaigning for it, including Warren B, Peter Lynch, Jack Bogle, and Joel Greenblatt.

What about Trading?

Once again we turn to Warren B.:

”The Stock Market is a Device for Transferring Money from the Impatient to the Patient.”

Numerous studies show that the vast majority of traders lose money. There are people with a better result than the average, but this is a small minority, which also actively trades much more than the average daily trader, and those who buy and hold, still earn more. As we can be see from many discussions on Reddit, daily traders scorn "hodlers" and attribute their investment success not to luck, but to skills.

Is HODL investment strategy suited to Altcoins?

All the above obviously refers only to the "blue chips" — BTC and ETH. And what about altcoins? Do they also need to be hold? Probably don’t.

The "buy and hold" or "hodling" strategy works only if the asset is viable for a long period of time. Most likely, 90% of current coins will cost nothing. Is it worth holding strong assets with a working business model.

 
Likes: Golem
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