If you’ve heard about hodling cryptocurrencies being a great investment alternative and dug into deeper details, you know it’s never an easy feat. Volatility has been their primary issue and the reason why many people shy away from the lucrative digital assets.
However, those who have the guts and trust their instincts are making and losing every day from crypto trading. Many crypto enthusiasts have adopted different strategies to minimize the risks and increase their potential for profits, but all in all, it’s never guaranteed.
Today, there are many crypto trading strategies and tools, and as new techniques come up, none seems to beat the popularity of the buy and hold strategy, HODL. This article will look at the aspects that make hodling a perfect plan for both beginners and seasoned traders.
What is Hodling?
HODL is an everyday slang among cryptocurrency traders. It was derived from the word ‘hold,’ and refers to a crypto trading strategy where individuals purchase crypto coins and store them in their wallets. Instead of hourly or daily trading, they hold the assets over a long period and sell when the prices are up.
The Upsides of Hodling
Cryptocurrencies have been the talk of the town from the beginning of the year 2020. The prices for major coins, Bitcoin and Ethereum, have hit new all-time highs, and the rally is only drawing more attention to the crypto world. After the 2021 price hikes, long-term holders of Bitcoin and ETH have a reason to smile.
Here is why hodling is the best strategy for anyone.
If you ever took time to observe a daily trader, you know how much of your time and analytical skills crypto trading requires. Traders practically spend time on cryptocurrency charts with different tools to help in technical analysis. Only the pattern direction will determine whether it’s a win or a loss.
However, it’s never the case for hodlers. Hodling means you purchase your preferred crypto asset, store it in your wallet and do nothing from there. There is no need to analyze any charts and track price movements in real-time. As a result, it is a simple strategy and ideal for both new and seasoned traders.
Traders must know the right entry points even as they use the method. It would not be entirely profitable buying coins during a bull rally. Traders should wait for the bear markets when many traders sell their assets and make this their entry point. Eventually, they get to profit when the bull rally begins, and ultimately as the value of the crypto asset increases.
2. Hodling is Cost-Effective
Real-time trading is both time-consuming and requires PCs, uninterrupted internet and power connection, and a host of trading tools. All these resources mean extra bills, and when you have to track price movement all day long, they could be hefty.
Hodling eliminates the need for most of these resources and saves you the time for other activities. All you need is access exchanges to purchase your coins, and you can store them in an offline wallet.
Additionally, you avoid the costs incurred in trading. The trading fees, the cost of trading bots, and withdrawals associated with trading can add up to a lot of money in the long run.
3. Incredible Returns
Although all cryptocurrencies are highly volatile, most of them generally have an increasing value over time. Taking a look at the world’s leading cryptocurrency, Bitcoin, it has, over the years, recorded significant growth characterized by highs and lows.
It is noteworthy that Bitcoin began trading in the year 2010 at $0.0008 and rose to $0.08 in a month. Fast forward to 2021, and Bitcoin price ranges between $5,000 and $6,000. Investors who would have used the hodling strategy at the time would have every reason to smile today.
From Bitcoin’s example, it is conclusive that crypto coins are great investments with a great potential for massive returns. They ultimately have a rising value, and therefore, hodlers have the opportunity to reap big from this long-term strategy.
4. Peace of Mind
Day trading is not for the faint-hearted. You are constantly watching cryptocurrency price movements, and you could watch your millions sink within minutes. At the same time, traders make massive money when the patterns move in favor of them.
The volatile nature of cryptocurrencies generally takes you through episodes of emotional stress and can be worse in times of continuous losses. Traders are always advised to commit what they can afford to lose.
Hodling, on the other hand, gives you peace of mind as you wait for prices to rise. It is a long-term trading strategy, so traders do not have to monitor progress. You can buy your coins and forget for months or even years.
As mentioned above, hodling is the perfect strategy for any trader. It may not earn you as much as day trading, but at the same time, it takes you off the risk of massive losses. It is much simpler than any other strategy used in the crypto industry, so the learning curve is not as steep.
It proves to be consistently fruitful, even with the minimal commitment to industry trends. Furthermore, many seasoned traders, including day traders, always maintain a hodl portfolio. Most of them tend to day trade altcoins such as Ethereum and Litecoin while maintaining their Bitcoin reserves. Traders use the altcoin trades to build their Bitcoin portfolio for the long term.