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Why Hodling Crypto Isn't a Great Investment Strategy: A Professional Trader's Perspective

Updated: Mar 6, 2023

As a full-time crypto, forex, and stock trader, my goal is to help my students become consistently profitable full-time traders. One of the most significant topics I hear about from new traders is hodling or holding crypto. This term has become a popular buzzword within the crypto community, but is it truly a wise investment strategy? In this article, I will explore what hodling means, why it's called hodling, and if it's a good investment strategy.




What does HODL Mean in Slang?


HODL is a slang term used in the crypto community, meaning "Hold On for Dear Life." It originated from a typo in a Bitcoin forum post in 2013, where a user meant to type "hold" but instead wrote "hodl." Since then, it has become a popular term used to describe the act of holding onto your cryptocurrency assets instead of selling them.



Why is Hold Called HODL?


As previously mentioned, hodling originated from a typo in a Bitcoin forum post in 2013. The post's author, GameKyuubi, was discussing his investment strategy and intended to write "I am holding" but instead wrote "I am hodling." The post quickly became viral, and hodling became a term used to describe the act of holding onto your cryptocurrency assets.



How do you Pronounce HODL?


HODL is pronounced the same way as "hold," but with a more emphatic emphasis on the "d" sound.



Is HODL a Good Investment Strategy?


Many influencers in the crypto community tout hodling as a good investment strategy or 'Diamond Hands'. However, as a professional trader, I believe hodling is not a great idea. Here are some reasons why:


  • Hodling can be costly: While hodling your cryptocurrency assets, you may miss out on potential gains or even suffer losses. The crypto market is incredibly volatile, and prices can fluctuate rapidly. If you're hodling your assets and the market crashes, you may lose a significant portion of your investment.

  • Opportunity cost: Hodling your assets means that your money is tied up and not being used to make other investments. While you wait for your crypto assets to increase in value, you could be making money elsewhere.

  • Lack of strategy: Hodling doesn't involve any strategy or analysis. Instead, it's a passive approach to investing that doesn't take into account market conditions or technical analysis.

  • Unrealised Profits: Without knowing the basic fundamentals of technical analysis, you will never know when to take profits.



Is it Better to HODL or Trade?


As a professional trader, I recommend trading over hodling. Trading involves actively buying and selling assets based on market conditions and. Here are some reasons why trading is a better investment strategy than hodling:


  • Potential for higher returns: Trading allows you to take advantage of market conditions and technical analysis to buy and sell assets at the right time, potentially leading to higher returns than hodling.

  • Active approach to investing: Trading involves actively monitoring the market and making informed decisions based on analysis and research. This active approach allows you to adapt to changing market conditions and take advantage of opportunities as they arise.

  • Risk management: Trading involves setting stop-loss orders to minimize potential losses. This risk management approach is not present in hodling, where you're simply holding onto your assets and hoping for the best.



Is it Wise to HODL Crypto?


As a professional trader, I believe hodling crypto is not a wise investment strategy. Cryptocurrency is incredibly volatile, and prices can fluctuate rapidly. Holding onto your assets for an extended period can be costly and result in missed opportunities.



Should I HODL Crypto or Sell?


Whether you should hodl your crypto assets or sell them depends on your investment goals and risk tolerance. If you're a long-term investor with a low-risk tolerance, hodling may be a viable strategy. However, if you're looking to make significant gains or are comfortable taking on more risk, selling your assets and reinvesting in other opportunities may be a better option.



How Long Should you Hold Crypto?


The length of time you should hold your crypto assets depends on your investment goals and market conditions. If you're a long-term investor with a low-risk tolerance, holding onto your assets for an extended period may be a viable strategy. However, if you're looking to make significant gains or are comfortable taking on more risk, selling your assets and reinvesting in other opportunities may be a better option.


It's important to remember that cryptocurrency is a volatile market, and prices can fluctuate rapidly. Keeping a close eye on market conditions and technical analysis can help you make informed decisions about when to buy and sell your assets.



Can you get Rich by Holding Crypto?


While it's possible to make money by hodling your crypto assets, it's not a guaranteed path to riches. The crypto market is incredibly volatile, and prices can fluctuate rapidly. There have been instances where hodling has led to significant gains, but there have been many more instances where it has resulted in significant losses.


As a professional trader, I recommend taking an active approach to investing in cryptocurrency. Trading based on market conditions and technical analysis can potentially lead to higher returns and better risk management than hodling.



Final Thoughts


In conclusion, hodling may be a popular buzzword in the crypto community, but as a professional trader, I believe it's not a great investment strategy. Trading based on market conditions and technical analysis allows for better risk management and potentially higher returns. It's essential to remember that cryptocurrency is a volatile market, and prices can fluctuate rapidly. Keeping a close eye on market conditions and technical analysis can help you make informed decisions about when to buy and sell your assets.


It's also important to note that many influencers in the crypto community promote hodling to encourage their followers to not sell. The reality is, the influencers likely did sell their holdings but by chanting 'diamond hands' and 'HODL', they get more engagement. This behaviour is detrimental to those who blindly follow their advice without doing their own research or analysis.


As a professional trader and educator at Spitfire Traders, I encourage my students to take an active approach to investing in cryptocurrency. This involves staying up-to-date with market conditions and technical analysis, as well as being willing to adapt to changing market conditions. By taking an active approach, investors can potentially maximize their returns while minimizing their risk.



 

About the Author:



Spitty is a full-time crypto, forex, and stock trader and an educator at Spitfire Traders. He has a wealth of knowledge and experience in trading and is dedicated to helping his students become consistently profitable full-time traders. With a focus on technical analysis, Spitty believes in taking an active approach to investing and encourages his students to stay up-to-date with market conditions and technical analysis. As an expert in the field, Spitty is committed to sharing his expertise and helping others achieve their investment goals.

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