What Does HODL Mean?
HODL (Hold On for Dear Life) is a passive investing strategy created to overcome the indecision of cryptocurrency volatility, expecting great profits from their mass adoption long term.
HODL is also a misspelling of “hold” that first appeared in a cryptocurrency forum in 2013. This philosophy often involves refusing to sell despite extreme price changes because, with the belief that Bitcoin will appreciate long-term, “traders can only take your money if you sell.”
Another similar term to HODL is BUIDL, which is used by the Ethereum founder Vitalik Buterin. It claims that users can proactively speed up mass adoption by developing tokens with more utility and using them instead of just accumulating and hoping.
HODLING: Strategy and Guiding Principles
The meaning of the HODL crypto strategy has been widely successful since the beginning, even for inexperienced traders. The process is straightforward:
- Find cryptocurrencies with the potential to appreciate exponentially long-term (such as Bitcoin)
- Buy at a low price and as much as possible
- Never sell unless it’s in steep profits
The idea is that even if traders forget about the investment for years, they will likely get back several times its worth due to the long-term Bitcoin cycles and adoption.
As an extra step, HODLers may choose to either wait or continue to buy regularly over time. This is similar to the Dollar-Cost Averaging strategy (DCA)—to invest the same dollar amount at a fixed frequency. However, DCA investors aren’t necessarily holding.
Taking profits
According to HODL, taking profits in a new industry is risky because investors may miss out on parabolic price growth. In a volatile market, inexperienced traders are often better off doing nothing than trying to capitalize on short-term price swings (better known as day trading).
HODL Guidelines
As a multi-year investing mindset, HODLing may also involve the following:
- Investing in cryptocurrencies with large market capitalizations
- Sending cryptocurrencies from centralized exchanges (CEXs) to non-custodial wallets to guarantee safer storage
- Locking crypto assets in staking protocols and earning compound interest
- Minimal market monitoring to avoid impulsive decisions based on FUD (fear, doubt, uncertainty)
Final Thoughts
Despite having no guarantees of long-term appreciation, HODL investors are generally profitable and enjoy wide opportunity windows to sell anytime.
This doesn’t mean they’re permanently profitable years later. Unless the HODLing started at the floor price or very early rallies, these investors are still at risk of losing most profits in the next bear market cycle. To avoid locking in losses for years, it’s recommended to hold with an exit strategy in mind, whether it’s partial, temporary, or absolute.
