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HODL Crypto : The safest strategy for investing in crypto ?
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HODL Crypto : The safest strategy for investing in crypto ?

Among the various investment strategies in cryptocurrencies, HODL is arguably the simplest and safest. Why ? Because it requires minimal skills and knowledge to implement. If you're interested in crypto but don't know much about it yet, HODL could be of great interest to you !

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Mis à jour le 12/05/2023 à 15:57

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What is HODL crypto ?

HODL is a term used in the cryptocurrency world, which actually means “hold“. Although the term may seem incorrect due to the spelling mistake it contains, it is widely used in this form within the crypto community.

Today, this term signifies a type of investment in crypto but also represents a certain community within the cryptocurrency ecosystem.

In this context, the definition of “hold” refers to the notion of retaining or keeping.

Crypto HODL is a relatively easy-to-understand investment strategy where an investor aims to hold a cryptocurrency over the long term. The underlying belief behind this technique is that the holders think the crypto market is just in its early stages and that the value of the cryptocurrency they hold will increase over the long term.

This is a technique that exists in other investment sectors, such as the stock market. For instance, when an investor buys a company’s stock, it is generally with the intention to hold it over the long term, believing that the company will increase in value over time.

Beyond the aspect of long-term gain, HODL has almost become a religion for some people who see it as an unwavering support for the crypto market. Hodlers are the soldiers who retain their tokens during market downturns and panic selling by most investors.

The HODL strategy can be appealing for anyone who wants to dip their toes into the crypto universe by investing without taking “too much risk” and without extensive trading knowledge.

Why “HODL” and not “HOLD” ?

Despite the spelling mistake in the word HODL, that’s the way it’s used. This typo originates from a mistake made by an investor, which later became a meme before being referenced as the meme and eventually became a common expression.

In 2013, at a time when cryptocurrencies interested only a small portion of the population, a pioneering investor opened a thread on the “Bitcoin Talk” forum with the title “I AM HODLING“.

In the message he posted, he explained that he was a bad trader and, for that reason, it made more sense to him to hold onto his tokens rather than sell them in panic or because others told him to sell.

He explained that only good traders and fools sell their tokens in a “bear market“, meaning a declining or stagnant market.

In the end, with his message, this user founded a true philosophy around HODL that was taken up and embraced by the entire community. The concept that only fools and traders sell in a bear market created the whole idea of HODL.

A straightforward strategy for those who believe in cryptocurrencies but are not familiar with trading. You buy and hold until the day the market has risen, and you can withdraw profits from your investment.

How to HODL crypto ?

HODL crypto is relatively simple in terms of the process because this investment involves buying a token and holding it for the long term.

To do this, you need to find a cryptocurrency exchange platform where you can open an account and purchase your tokens. The most well-known and widely used exchange platform at the moment is Binance.

The registration and account creation process on Binance is relatively straightforward and quick. Only the identity verification procedure may take a bit more time.

Once you have created your account, you can start buying your tokens using your credit card or a PayPal account. After acquiring your tokens, it’s essential to store them in a secure location to protect them from loss or theft.

Regarding your purchasing strategy, you have flexibility. Since the idea is to hold the tokens for the long term, the purchase price is not the most critical element of your investment.

However, it’s evident that it’s preferable to buy your tokens when the market is low. The crisis of 2022 can be a good time for novice investors looking to get into crypto holding (and also for experienced investors looking to bolster their portfolio).

Holding cryptos with a DCA Strategy

A perfect investment strategy for hodlers is the DCA strategy. Literally, Dollar Cost Average, this technique involves averaging the purchase price of a token by regularly investing over an extended period.

The principle of DCA is to establish a fixed and regular investment plan and stick to it.

For example, you decide to buy 20 $ worth of Bitcoin every week. By doing this, you shield yourself from the regrets of buying low or the difficulty of purchasing when the market is high.

The consistency and regularity of your investment smooth out the purchase value and enable you to hold your tokens while achieving significant profits over the long term.

What are the platforms for hodl and storing tokens ?

As we explained in the previous paragraph, to hodl a cryptocurrency, it is necessary to buy them through an exchange.

As a reminder, you can invest in crypto through either an exchange or a broker. The difference is that a broker sells you a contract on the movement you decide on the cryptocurrency’s price (in this case, bullish), but you don’t actually own the token. You are entirely dependent on the platform.

An exchange is a platform where you actually buy the cryptocurrency and become the owner of the number of tokens you purchase.

If you decide to HODL tokens, we strongly recommend using an exchange rather than a broker.

To choose the exchange that suits you, make sure in advance that the one you select offers the ability to buy the crypto you want to hodl. In principle, you will choose a crypto of significant importance, and it’s highly likely that all major exchanges will offer it.

Today, here is the list of the primary exchanges in the market in terms of daily trading volume:

  • Binance
  • Coinbase Exchange
  • FTX
  • Kraken
  • KuCoin
  • Binance US
  • Gate.io
  • Bitfinex
  • Gemini
  • Huobi Global

How to store your tokens ?

Once you have purchased the tokens you want to invest in and hodl, it’s essential to store them securely.

You can initially choose to store them within the same platform where you purchased them. When you open an account on an exchange, it automatically provides the option to store your cryptocurrencies on the platform in a wallet called a “custodial” wallet.

In other words, it’s a wallet on the platform. However, this wallet doesn’t truly belong to us 100%.

It’s similar to having a bank account : if the bank closes, our account and money disappear.

Another solution is to have an external wallet outside the exchange platform. There are hot wallets and cold wallets.

Hot wallets are decentralized wallets that you install directly in your web browser. You have exclusive access to this wallet through a password and a recovery phrase that only you possess. This wallet will enable you to securely hodl your tokens.

Cold wallets are physical wallets that you need to purchase (such as Ledger) and come in the form of a device that you plug into your computer like a USB drive. You can store your tokens in it, and it’s the solution that most closely resembles a physical wallet where you keep real money.

The key is to choose a secure method for storing tokens that will remain stationary for a certain period.

Our review of HODL

The HODL strategy is a legitimate strategy in the world of crypto, and it is widespread. Most investors in the HODL community hold a certain portion of their crypto capital.

Often, HODLing is done with major cryptocurrencies or projects in which you have very high confidence. The goal is to retain tokens for the long term and see them increase in value.

Today, some projects disappear overnight. Some offer no technological advancement or ambition. Caution is necessary.

The crypto you want to HOLD must have a very high level of trust.

Generally, people hodl cryptocurrencies like Bitcoin or Ethereum, which are major projects with a long-term horizon. If you are interested in the crypto market, adding HODLing to your investment strategy can be beneficial.

However, always exercise caution. Even though this strategy is relatively secure, we don’t know what the future holds, and some cryptocurrencies may appear very strong and then collapse.

Don’t forget to diversify your investment and remain aware of the risks.

Your strategy also depends on your objectives. HODLing is not a strategy that will bring you quick returns. If you want short-term gains, an interesting strategy can be crypto trading and reinvesting your profits in HODL.

⚠️ This article is published for informational purposes and should not be considered as investment advice. Crypto-currency trading involves risk and it is important not to invest more than you can afford to lose.

InvestX is not responsible for the quality of the products or services presented on this page and shall not be held liable, directly or indirectly, for any damage or loss caused as a result of using any goods or services highlighted in this article. Investments related to crypto-assets are risky by nature, readers should do their own research before taking any action and only invest within the limits of their financial capabilities. This article does not constitute investment advice.

Thomas

Thomas

Web editor for many years and SEO specialist, Thomas became an editor for InvestX when the site was launched. Passionate about the field of crypto and Web3, Thomas has made it his mission to deliver maximum value and introduce readers to the world of blockchains, considered for him as the world of tomorrow.

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Risk Warning: Trading financial instruments and/or crypto-currencies involves high risks, including the risk of losing all or part of your investment, and may not be suitable for all investors. Crypto-currency prices are extremely volatile and can be affected by external factors such as financial, regulatory or political events. Trading on margin increases financial risk.

 

Before deciding to trade in financial instruments or crypto-currencies, you should be fully informed of the risks and fees associated with trading in the financial markets, carefully consider your investment objectives, level of experience, and tolerance for risk, and seek professional advice if necessary.