Whether to hodl or trade cryptocurrency remains a massive challenge for those entering the crypto world. While both strategies offer ways to make money from crypto, they also come with a set of concerns.
Hodling (a purposeful misspelling of holding) refers to keeping your crypto assets through the ups and downs of the market. Hodling is a popular trading strategy as you don’t have to monitor market movements. Once you buy the asset, you set a goal then stick to it. Hodling also offers massive payoffs when the token becomes massively popular in the long run. For example, most Bitcoin millionaires bought the token on the lows and have held it for many years until it has become what it is today.
You also don’t have to deal with complex tax reporting or filings when you hodl.
At the same time, hodling can present a massive psychological challenge. For example, when you hodl and the value increases, you can miss on taking profits at the right time. Even worse, after buying the token on a high, it is tough to keep hodling when the asset loses around 40% or even more. The strategy requires strong resilience to continue hodling during the bear market.
How to Hodl the right way
Even though hodling remains the ideal strategy for crypto traders, you have to understand how to go about it the right way to gain. Doing it the right way means you won’t miss the profits, or panic sell.
The most important thing is to have is a long time horizon, meaning you will not need the money for a long time. For those entering the market, a dollar cost-average strategy is often recommended for hodlers. Dollar cost-averaging is when you buy a set amount every week, month, or other time period – consistently. This allows you to capture the average price during your investment period.
It is also important to not trade at all. One often misconstrued idea by new entrants is that it is easy to sell the tops and buy back when the price is lower. However, if executed badly you may price yourself out of the market. For example selling BTC at $20050 USD (a new all time high at one point) would have seen you miss the move to $68000 USD and potentially have priced you out. Timing tops and bottoms is extremely risky and not recommended by the wider investing community. You also need to stay patient and in emotional control when hodling. As a volatile industry, the price can change massively over a short period.
Bottom Line
Even though it’s tempting to sell your assets during a bear run to avoid losses, it’s actually ideal to hodl and even buy some more. This allows you to gain from the market correction and the proceeding bull run. For Bitcoin, you are better off hodling as the market will always correct and gain more, and the long term trend of Bitcoin is up.