We live in a culture that values disposability and the ability to quickly replace things.
Sure, there are a few things that people don’t want to replace. Typically, those types of things have to do with relationships, though, such as a spouse, children, family and friends, or even keepsakes that remind you of those relationships.
There is one other thing that many people recommend not discarding quickly, and that is investments.
While there are some who focus on the quick buck, buying and selling for the immediate gratification, people doing that don’t usually make much money long term, and, often, those people come from a gambling frame of mind instead of thinking long term as an investor.
If you’re looking into crypto, though (and you should be), then, you need to go into it from that long term point of view. And that’s why, in crypto, the most successful investors use the HODL philosophy.
Hodl? What’s that?
Great question. The story goes that the term was actually a typo. “Hold” is what was meant to be typed, but “Hodl” is what came out.
Eventually, though, it came to mean “Hold On for Dear Life.” In other words, it’s a philosophy of buy and hold long term. As in, potentially, “forever.”
And if you’re investing in cryptocurrencies, long term is the only way to do it.
Take bitcoin investors, for example. The ones that hold the largest amount of the wealth in bitcoin include people and organizations with this long term perspective. Andrew Kamsky with CCN.com writes:
At the top of the crypto ecosystem are humpbacks, holding over 5,000 Bitcoin in a single wallet which surpass even the whales, who hold between 1,000 and 5,000 Bitcoins in a single wallet. These groups include high net worth individuals, early Bitcoin adopters and large institutions…
You’ll notice that all three of the groups mentioned have a long term investing mindset and that many apparently have the HODL philosophy, specifically. After all, you don’t become an early adopter and also one of the biggest holders of bitcoin without having decided to hold on to that crypto come hell or high water.
As Kamsky explains of so-called “humpbacks”:
This categorization tends to hodl onto their coins for long periods of time…
Next, we should look at a question that comes up when talking about the HODL perspective is…
What are the advantages of hodling?
Always a smart question to ask when considering how you will be investing.
The primary reason why a person buys and holds an investment over a long period of time is the same, regardless of what the investment is. Writers at Investopedia put it this way – I’m summarizing a bit:
Long-term crypto HODLers stay invested because they believe cryptocurrencies will continue to rise in value, and they will be rich.
HODL investors in crypto also believe that cryptocurrencies have one of (if not the) best potential for long term capital appreciation among all possible investment vehicles.
Another advantage to HODLing crypto has to do with the increase in scarcity of many cryptocurrencies.
That may seem counterintuitive, but stay with me here. Kamsky notes:
Approximately 29%, nearly a third, of all Bitcoins ever created are now considered lost and gone forever. This estimation implies that about 7.7 million Bitcoin has not moved from said wallets, suggesting they are no longer accessible.
Let’s follow the logic one step further. Again, from Kamsky:
Lost Bitcoin remains on the blockchain and is permanently frozen in wallets, effectively and indirectly reducing the circulating supply. The reduction in supply can contribute to the scarcity of Bitcoin, potentially increasing its long-term value.
That’s right, those who simply hold cryptocurrencies actually benefit from lost coins on the blockchain.
That’s a value increase that those with the daytrader mindset won’t benefit from.
So, your next question may be…
Is it too late to become a hodler?
An old proverb says that the best time to plant a tree was 20 years ago. The second best time to plant a tree is right now.
It’s the same with crypto. You should buy now and hold on to those coins. Again, from Investopedia:
Based on these principles, the best time to HODL is now, always, and forever. A true believer would always hold on to their tokens, even if markets crash or become extremely volatile. HODLing becomes an ideological belief about the long-term prospects of blockchain technology, cryptocurrencies, and the communities that have formed around them.
The thinking is simple, really: you should do your research and make smart cryptocurrency investment choices as soon as you can.
Then, you’re free to hodl those assets just like any long term investor does.
And if you need more information to make those smart investment decisions, simply request your free Insider’s Guide to Digital IRAs.
Note: This article was inspired by Andrew Kamsky’s truly impressive Psychology of Bitcoin Hodling: Why Investors Refuse to Sell in Crashes. For the full story, and an even better understanding of the advantages hodlers may have over every other asset class, click that link. But let me warn you, Kamsky’s article is extremely long!
