HODL is a term derived from the misspelling of the word “hold”, which refers to strategies of buying and holding over a long period of time (from several months to a year or several years!).
Holding is a relatively new term for investing in cryptocurrencies. This term means avoiding trading based on short-term price movements.
The very first time the term HODL appeared on a Bitcoin forum was in 2013 and came from a person named “GameKyuubi” under the title “I HODLING”.
Judging by the message, the user made a typo and meant that he was holding his BTC, despite the fact that at that moment the price of the coin had dropped significantly.
Since then, this misspelled term has become very popular in the world of Bitcoin and cryptocurrencies. Whenever a person says in a conversation that he or she is hodling ( Holder ) or offers you a hodl (hold) coin, it means that they believe that their coin will be profitable one day and that they are willing to wait until it will not increase in price.
Therefore, the term "HODL" was originally a typo that has now become a humorous backronym:
"HODL" - "hold on with all your might."
What does it mean to hold cryptocurrency?
According to the definition of business magazines, holding a cryptocurrency means maintaining an investment in Bitcoin even during a fall in value. There are reasons for choosing such a strategy. Over the years of their existence, almost all popular cryptocurrencies have grown in the long term.
Investments in cryptocurrency
Bitcoin rapidly fell in price by more than 80% several times, and then returned to its initial position or even grew. There are still certain risks in holding cryptocurrency - there are no guarantees that after the next fall the market will return to its original state.
Example of a holding
The first example of how to hold cryptocurrency was given by a user who made a typo and became the author of the meme. In December 2013, the crypt (bitcoin) rose to almost 1.1 thousand dollars per coin. But then within 24 hours there was a collapse of almost 39%. This user himself admitted that he was a bad trader, but decided that in this case, holding means preserving funds in conditions of volatility.
This is a counterbalance to the fear of missing out and selling digital currency ahead of time, that is, at a lower price. This trader soon gained followers, so holding became a strategy. In October 2022, the Bitcoin exchange rate is more than 65 thousand dollars, which indirectly confirms that he is right.
Slang in the cryptocurrency community
You know what HODL is, but the list of newly formed words does not end there. We invite you to familiarize yourself with the most popular cryptocurrencies jargons:
- FOMO (Fear of missing out - fear of lost profits). Used when the user is afraid of losing his profit as a result of some decision or investment.
- All time high (highest cost of all time). It is used to indicate the moment when the price of a cryptocurrency reached its highest level.
- Choyna, China (distortion from China - China). This linguistic distortion was introduced due to the fact that China is a country that has quite a large influence on the cryptocurrency world.
- BAGHODLER is a slang term for an investor who has held his cryptocurrency in his portfolio for too long and has now suffered a loss.
- ADDY is the name given to the public key that is required to transfer cryptocurrency to another user. Most likely, this term was formed as a result of the abbreviation and reversal of the words “your address”.
Russian-speaking users also did not stand aside. Especially often on the Internet you can find Russian-language distorted names of various cryptocurrencies and exchanges:
- Ether - kefir.
- Bitcoin is a cue ball.
- OKCoin – point or pointcoin.
- Altcoins – alta.
- Poloniex – Polonia, Wormwood, etc.
Of course, in this article we have not mentioned all the slang expressions, so if you have something to add to our list, leave your suggestions in the comments!
Who is a holder in cryptocurrency?
A holder is a person who specifically buys an asset and “forgets” about it for a long period of time. This distinguishes him from traders who seek to make profits over short periods of time of a few minutes or hours. This does not mean that the holder will not go to the exchange at all and monitor the cryptocurrency rate. He still needs to be interested in all the processes taking place in the cryptocurrency market. Then the holder will have the opportunity to notice growth or, conversely, negative trends in time.
Hodl in cryptocurrency
You don't have to invest only in Bitcoin to hold. You can choose another cryptocurrency. But you need to carefully study it - the idea of the developers, information about themselves and their goals. Because there are examples of little-known currencies that were rapidly losing value, and going into such projects was very risky, because it all ended in a complete loss of money.
A holder is an investor who is convinced that crypto is the basis of a new economic structure, which means its rate will grow in the long term.
Advantages of Cryptocurrency Hodl
The advantages of cryptocurrency hodl are obvious. If an investor expects to hold coins for several months or years, he has no need to react to temporary market crashes, be nervous about what is happening, and also update cryptocurrency rates and his own portfolio a hundred times. He knows that after some time the market situation will be much more attractive, so he can let the situation take its course.
Cryptocurrency trader
Now this is especially true when BTC is being bought by Tesla, MicroStrategy, Square and other giants of the global industry. It is obvious that, at a minimum, Bitcoin is definitely not going to die and fall to zero.
The most popular meme about cryptohodler is a still from the movie “300”. Here, hodlers are portrayed as courageous warriors who do not plan to give up even in the most unattractive market conditions.
The most popular hodle meme
Pros and cons of the HODL strategy
Advantages of the strategy:
- preserving nerves is a powerful argument for those who, due to psycho-emotional stress, cannot trade on short periods;
- no need for deep knowledge and trading skills, just basic skills;
- hard forks are alternative branches of the blockchain, when holders of one cryptocurrency receive another for free (a Bitcoin fork, for example, demonstrates good capitalization indicators).
This strategy has only one drawback - the risk of losing all investments due to events that could not be predicted in the short term.
When is it profitable to “hold”
The holding strategy is beneficial for Bitcoin and altcoins included in the TOP 50. As the cryptocurrency market develops, the price of leading digital assets is growing, despite the high volatility in the market in relation to fiat currencies. This is primarily due to the increase in participants in the cryptocurrency market and its introduction into various areas.
To select a coin for long-term holding, you need to pay attention to the following indicators:
- The usefulness of the project and what problems it solves. If the functions of a cryptocurrency solve important problems, then there is a high probability of its successful promotion and growth in price.
- “White Book” and “Road Map” revealing technical aspects and further plans for the development of the project. Analyze completed plans according to the roadmap.
- Team. Openness of public information about the creators and owners of the platform. Typically, in fraudulent projects, this information is carefully hidden, and the increase in the price of the coin (hype) is short-term, followed by a rebound to a minimum value or complete liquidation.
- Liquidity and trading volume. Most cryptocurrency exchanges provide reliable information about these indicators, allowing you to conduct an audit of the state of supply and demand in the market.
- Cooperation with other companies, projects and government agencies. This indicator also affects the reliability and relevance of the project.
- Number of moment holders on active wallets. This information is not always available, but some cryptocurrencies provide such information on their website or on monitoring services (CoinMarketCup, CoinGecko).
Advantages and disadvantages of holding
Any investment strategy has both positive and negative sides. The “advantages” of the holding include the following.
- With a privately chosen holding strategy with diversification of cryptocurrencies, the profit is significantly higher than with classical financial instruments (gold, shares, real estate).
- Low cost of entry. Many cryptocurrencies allow you to buy fractions of an entire coin. For example, 1 Bitcoin is equal to 100,000,000 Satoshi. The entry threshold is 1 satoshi. Please note that not all wallets support micropayments.
- Reward percentages for some cryptocurrencies can reach 50%.
- You do not need serious technical equipment or a high level of knowledge to own crypto assets.
- By accumulating liquidity, in most cases, commissions within the network are reduced, and the stability of the ecosystem increases.
To the negative factors:
- Due to the uneven distribution of coins among participants, when one of them accumulates a large number of coins, he has a monopoly advantage to influence processes that may be unprofitable for others. This can affect the price of the asset and reduce the reward in case of staking.
- The risk of project closure (SCAM) for any reason.
- Decrease in value from initial investment. The moment to enter was chosen poorly (buying at the peak of the price).
- Using staking using the Proof-of-Stake consensus algorithm, it is necessary to fulfill the conditions of the selected blockchain (minimum number of coins in the wallet, freezing of coins).
- Risk of unauthorized access from intruders. In this case, it is recommended to store most of the funds in cold wallets that do not have constant access to the Internet.
ISO
Incorrect transliteration of the abbreviation ICO from Initial Coin Offering, which means “initial coin offering”. It sounds like an IPO, an initial offering of shares. This is no accident. In essence, this is the same thing, only instead of shares, tokens are sold, i.e. new cryptocurrency or cryptoasset. Such tokens usually do not provide rights to company property. But there is a chance that after going public, their value will increase when the team issuing them creates a product that will use these tokens.
REKT
destroyed, wrecked
This is a deliberately distorted transcription of the word "destroyed". This term refers to a trader or investor who is completely wiped out by losses from the current price decline. The same term exists in online games.
Violas
From the English “altcoins” or “alternative coins”, i.e. alternative cryptocurrencies. Apart from the one and only Bitcoin, other cryptocurrencies are considered “alternatives”. The most famous alt is ether or Ethereum. Although the ether is already so large that it would be more correct to separate it into a separate category.
The world of altcoins, or rather only a small part of it
Russian terms
Cutlet
It comes from the criminal world, where the cutlet is a pack of degeg, rolled into a characteristic shape. But when you are called to “go in for the whole cutlet,” it means that people are confident in the profitability of the operation and advise you to invest everything that is on the exchange (and maybe more).
Snot / Dildak, dildo
In the first case, a long downward shadow in a candle or a red candle itself, usually on the chart up to half an hour. In the second, back - a sharp rise in the rate due to the green candle.
Bucket
A bucket is a buy order that is placed significantly lower than the current price. This is done in case of exchange rate fluctuations, when shadows can reach the set level and destroy stop limits. After a short-term drop, the price returns to the previous level, and the owner of the “bucket” makes money on the difference, since he purchases at the bottom.
Pump and dump
From the English “Pump and dump”, which translates as “pump up and dump”. First, manipulators buy some nondescript, low-liquid token for three kopecks. Then they inflate the price, quickly buying up all offers at any price. This is the pump . In chats they write about wild growth. FOMO sets in! Hamsters enter the market and buy at a price several times higher than the initial one, prices soar even higher... And then the manipulators abruptly sell off their positions. This is a dump . The price collapses and the hamsters are left with depreciated tokens, which they sell for the original three pennies.
Remember the movie "The Wolf of Wall Street"? That's exactly what they were doing there. It's illegal on the stock market, but crypto is the wild west and it's rolling. There are chats where they say that you can make money from this. Yes. But they usually make money from the participants.
Pump or dump?
Holding in liquidity pools
A liquidity pool is a digital storage of funds to ensure high liquidity of a coin. Thanks to it, a large volume of turnover is ensured for various purposes. The higher it is, the better for cryptocurrency. Commissions received from trades are distributed as profits to liquidity providers.
The operating principle is similar to the banking system - funds raised from depositors are used for various projects and loans, and the bank receives commissions for this and distributes it among depositors. In the case of cryptocurrency, there is a third party, that is, there is no bank and the process is managed by the blockchain.
There are also staking pools. Network participants unite to increase the chances of becoming a validator by receiving block rewards and transaction fees within the ecosystem.
Three main types of exchanges
I will briefly describe each type.
Stock
This is where securities are sold. The most common among them are stocks and bonds. I already had articles about them, open them and take a look. To at least understand the essence of these financial instruments.
Futures and forwards are also sold on the stock exchange. I will tell you about them soon in a separate article. Some economists classify these two financial instruments as a separate segment of the exchange - the futures market, while others classify them as the stock market.
Foreign exchange
Its other name is Forex. This is the youngest exchange. Currencies are bought and sold on it. For example, I decided to go to study in Germany and I needed euros. I go to Forex and exchange my rubles for euros there.
If I decide not to go to Germany and enroll in a Japanese university instead of German, I will again go to Forex and exchange euros for Japanese yen there.
Of course, I will go to the bank, and not to the stock exchange. But banks will conduct exchanges through Forex.
Commodity
“Goods” are sold here. The word “product” must be understood in a very broad sense. Products include:
- Precious metals: gold, silver, platinum, palladium, etc.
- Raw materials: oil, gasoline, coal, fuel oil.
- Agricultural products: corn, tea, cotton, rice.
And much more.
mouth guard
There are two meanings of this term. First, cap from the English “cap” or “market capitalization” . Those. capitalization of any crypto asset. It is calculated simply: price x number of units produced. You can watch it on coinmarketcap.com.
The second meaning is from the English “cap”, which means restriction. Typically, this is a restriction on investing in an ICO. Personal cap - the maximum amount of investment of one person (this is done to prevent whales from buying everything at once). Soft cap is the minimum amount of funds required by the project team. Hard cap - the maximum amount of funds, after reaching which the ICO is terminated.
Tuzemun
Tu ze mun from the English “to the moon”, “to the moon”, or “mooning” or “muning”. Signifies the goal of every crypto enthusiast: the price of your favorite cryptocurrency soars to the moon! Everyone has their own moon. When $10,000 was the moon for Bitcoin, and to the pioneers, $1,000 seemed like a pipe dream.
When there is FOMO or FUD in the market, the correct answer is only HODL :)
How does coin burning occur in the cryptocurrency market?
Today, there are several methods for burning crypto coins:
- Burning in wallets
A specific address is created and the amount that needs to be destroyed is sent to it. There are no private keys to access this “wallet”, and no one can enter the wallet and use the coins. The address is usually published publicly, so anyone can track transactions made to it and check whether the coins were actually burned.
- Commission burning
Typically transaction fees are sent as rewards to miners, but there are a number of currencies that eliminate fees. This system is also used for burning coins. A transaction for a small amount is created, sent to a real address, and a commission is applied to it in the amount of the burned amount. Sent coins remain in the system, commissions are destroyed.
- Combustion using special software
There are programs specifically designed for burning cryptocoins. The algorithm for their operation may vary, but the general principle is the same: they withdraw a given number of coins and send them to “nowhere”.
- Burning via Blockchain Change
An indirect burning method involving the creation of a hard fork. A critical change is made to the code of the cryptocurrency, which does not allow it to function in the previous blockchain. In essence, a new cryptocurrency is created with the number of coins that were decided to remain in circulation, and the original version ceases to function along with those coins that were planned to be burned.
BUIDL
It appeared as a parody of the projects’ promises to “build useful things on the blockchain,” from the word build = to build.
It also often means “continue development no matter what,” that is, not paying attention to the market depression and the outflow of money from lovers of easy money. This is the ideology of developing a new economy.
In addition, new projects must build a community around them. In general, you often have to buy in the world of cryptocurrencies.
We can say that HODL is awarded to the project that BUIDL =)
Here's a short glossary for other common cryptocurrencies:
The largest cryptocurrency holders
Holders on whom a large number of cryptocurrency assets are concentrated set the dynamics of the digital money market. The largest Bitcoin holders are presented in the table.
The stablecoin Tether (USDT) has a 1:1 ratio to the US dollar. The largest holders of these tokens are presented below.
Among the coins that tend to have high volatility is the “joke coin” Dogecoin (DOGE). This asset has almost 50% of all coins in 10 wallets. This ratio makes it easy to manipulate the price of a digital asset.
Data provided by the ratio of moment ownership to total issue is one of the factors determining the choice of asset for holding.
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