What Does Diamond Hands Mean?
“Diamond hands” is a slang term used in trading communities to describe a strong risk tolerance and resistance to selling at a loss.
It has similarities with the HODL mentality (never selling until profitable), except it’s more commonly used for riskier assets and also outside cryptocurrency investing. The opposite term is “paper hands,” for fearful traders ready to sell at the slightest price change.
How Was Diamond Hands Started?
“Diamond hand” first appeared in 2018 on the WallStreetBets Reddit channel. After the Gamestop buying frenzy of 2021, both terms were popularized in Twitter crypto discussions.
Both diamond and paper hands are mostly mentioned when experiencing major price losses rather than gains.
What Are Diamond Hands vs Paper Hands?
Paper hands are the exact opposite of diamond hands, meaning:
- Diamond-hand investors won’t sell despite a 50% loss and may even keep buying
- They’re less likely to take profits unless the asset sees explosive growth (such as 300% or more, hence the diamond’s worth parallelism)
- Diamond-hand investors still sell cryptocurrencies more often than HODL investors, but it’s usually to buy back at lower prices
Both can also be compared by their representing materials. Unlike paper hands, diamond hands are volatility-resistant and capable of calmly weathering any market storm.
What Are the Benefits of Diamond Hands?
Diamond hands imply the typical benefits of investing with high-risk tolerance:
- Maximize profits: Diamond hands hold assets for longer even with profits, so they don’t miss out on sharp price surges.
- Lower entry points: Diamond hands are comfortable holding and adding positions in the red. This reduces the average token price and allows them to break even faster when prices recover.
- Floor price stability: At scale, a token with many diamond-hand investors can deter others from panic selling. Traders can recognize this using depth charts when the current price shows high buyer volume below and low seller volume above.
Diamond hands are often admired, and paper hands are frowned upon because the former allows for much higher profits. When it comes to investing strategy, however, both can be misleading. For example, “diamond hands” overlap with greediness and oppose risk management, sometimes resulting in missed profits and greater losses.
