HODL is both an action, and a belief. For your own benefit, I urge you to adopt both– and reap the rewards.
One day, while talking about the future, one of my friends told me he was looking for a way to make the most of his savings. So far, his Wealthsimple portfolio wasn’t looking so hot.
I responded with a one-word solution. “Bitcoin”.
His response was 20% confusion; 80% deadpan. “Isn’t it too late for that?”
I literally laughed at that sentence. Not because I think it was stupid, but because it was just so indicative of the disconnect between perception and reality that the average person still has regarding this asset.
Common understanding would have you:
- Buy “early” (DEF. Some unspecified time before you knew about it).
- Ride the wave of excitement for a couple of months.
- Get out while you can before everyone flees and the price dumps.
- Make a quick buck, and go spend it on clothing
Well, I have a different way of thinking about things. When the price goes down, I buy. Then, when the price goes up, I buy again. Then, whenever I have money that I’m not spending on necessities, I buy Bitcoin again… and I don’t sell it. Ever.
In other words, I HODL. I engage in HODLing. Allow me to tell you what that is, and why I do it.
DISCLAIMER
This is NOT financial advice, nor am I a financial advisor. I am not pretending that I can see the future of the market. This blog is merely intended to raise awareness about a developing asset that I believe could be world changing. All normative and predictive statements made herein are my opinion, and should not be definitively interpreted as fact. I encourage all readers to expand their Bitcoin research beyond that of my blog, hear other’s opinions, and diversify their information sources. Financial decisions made in light of this information are yours to make.
In the spirit of Bitcoin: Don’t Trust; Verify.
What is HODLing?
‘HODL’ is an amusing term. To the untrained Bitcoiner’s eye, it may look like some sophisticated techy phrase– a programming language, like ‘HTML’.
Their slightly better read peers may have seen it used in a sentence. Perhaps they googled it, and interpreted it as a simple acronym, meaning to “Hold On for Dear Life” to one’s Bitcoin.
Google definition of HODL.
Sadly, the origin of “HODL” is far more stupid than either of these groups– including Google– can guess. In reality, the word “hodl” simply means “hold”– in fact, it’s supposed to be the same word. But the man who coined it in a 2013 Bitcoin forum post was having a little trouble spelling it.
The Meme Post
After the great price-runup in December of 2013 to $1200 U.S, Bitcoin quickly went crashing down again to $438 on the morning of December 18th, according to CoinDesk’s price index.
That’s when the now infamous Game-Kyuubi posted “I AM HODLING” to bitcointalk.org. In his self-admittedly half drunken state and inability to spell correctly, Kyuubi makes an impassioned rant about how he is not selling any bitcoin regardless of the price crash. He admits that he is a “bad trader”, but that he won’t let the day traders scare him into weakening his hand.
The spirit of his rant– combined with his drunken rambling and mentioning of his girlfriend being a lesbian– made the post instant meme material. Commenters echoed his sentiment with the word “HODL!”, and the term spread like wildfire to the point where today, it’s actually taken seriously.
Yeah, the internet can be funny that way.
Why You Should HODL
But does that mean HODLing Bitcoin is a good strategy? Or should we look elsewhere for investment advice besides the sleepless ramblings of a man that’s “had some whiskey?”
Believe it or not, if you look past the spelling mistakes, Kyuubi actually knew what he was talking about. Here are the basic reasons why you should jam-pack your Bitcoin wallet– in plain English.
HODL Reason #1- Bitcoin isn’t ‘risky’ in the long run.
Any traditional investment advice you will receive about Bitcoin will characterize it as a ‘high risk, high return’ strategy. This is done for a couple of reasons.
- ‘Bitcoin’ and ‘crypto’ are often used synonymously in the mainstream. This tanks bitcoin’s credibility, which is weighed down by the thousands of other altcoins next to it. Altcoins tend to swing in value more erratically–and fail more miserably– than Bitcoin.
- Bitcoin IS risky– if you’re a day trader.
Remember that friend I mentioned earlier? Well, he did end up buying some part of a Bitcoin fund. I happened to tell him to buy at a good time (December 2020), and the price of Bitcoin began to rise fast after that. He soon messaged me a screenshot of his portfolio, which was 100% in the green, with the message “God Bless You”.
That’s when his dad entered the picture. Influenced by his naive skepticism of Bitcoin, he demanded my friend to sell immediately, as he should “be happy with the gains he had made already”.
In other words: Buy early, ride the wave, get out quickly. Same old story..
While it is true that Bitcoin does fall prey to speculative bubbles and weak hands, it usually holds far more value than it loses through each boom and bust cycle. This leads to a long term-trend for Bitcoin that is far more optimistic and stable than the media would have you believe.
Bitcoin Price August 30th 2021. Source: CoinDesk
Each boom and bust manages to hold just a few people that learn about– and come to believe in– Bitcoin’s underlying value, which helps raise its price floor consistently over time, making it a reliable long-term investment.
HODL Reason #2- This is Where the World is Headed
What I said before about not selling my bitcoin was not hyperbole. I really don’t mean to ever sell it.
The New Store of Value
While that may seem to defeat the purpose of investing, that’s because of another fundamental misunderstanding average joe’s and traders have about storing value in Bitcoin.
Bitcoin is not a collectible item to eventually be redeemed for “real” liquid value like dollars, or other fiat money. Rather, it is fundamentally the most liquid, trustworthy, and stable asset, and it is only a matter of time before it realizes that potential. It is, as Michael Saylor puts it, “the apex property of the human race”.
Only months ago this would have seemed like an insane proposition. However, this June, El Salvadorian president Nayib Bukele announced that he would be establishing Bitcoin as legal tender in his country. This means that all businesses would be mandated to accept Bitcoin as payment for products and services, just like the dollar.
That mandate takes effect just one week from now.
President Bukele sees what the rest of the world’s leaders are yet to understand: That Bitcoin will serve as a hedge against the intrinsic, inflationary nature of the US dollar, and will offer financial inclusion to billions around the world that need it most– including his own citizens.
While most of the world does not yet have access to traditional, reliable banking, most of the world does have access to a smartphone and the internet– all that is needed to participate on the Bitcoin network. This allows Bitcoin to neatly fit the role that its creator intended– to be perfect, digital money.
Momentum
There are a mountain of reasons for which Bitcoin functions as better money than the paper currency that we use today. Alas, that would require a number of economics classes to fully flesh out. All that prospecting HODLers need to know is that world leaders are recognizing this value, and many more are planning to hop on board.
This gives HODLers more to look forward to than ‘selling their bitcoin’. For us, by the time we do redeem our bitcoin, it will likely be for a product on the global market– not another currency.
Conclusion
HODLing may be seen merely as a long term investment in Bitcoin. However it is better defined by an attitude and belief that strong hands tend to possess: That Bitcoin is not an asset to be sold at all. Rather, it is to be clung to like digital gold– an asset which it is effectively in the process of replacing.
What do you guys think? Is HODLing wise, or are we better off buying low and selling high? Let me know what you think in the comments below.
Stay Stackin’
Andrew
