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What Does HODL Mean?


There’s no question the HODL strategy has paid off well for GameKyuubi and other Bitcoin investors that have held onto their crypto investments.

Since the original HODL forum was posted in December 2013, Bitcoin prices are up about 2500%. Even investors who bought on the first day of 2018 and employed a HODL strategy are still up more than 17% on their investment.

But Bitcoin’s gains don’t come without years of “HODLing” through stomach-turning losses.

Bitcoin’s extreme volatility has produced a handful of horrendous annual returns throughout the years. For example, Bitcoin shed 50% of its value in less than 48 hours of the Covid-19 pandemic-induced sell-off in March 2020. The original crypto plunged to $US4000 before ending the year around $US29,000.

Today, Bitcoin prices are down 73% in 2022 as rising interest rates have triggered a sell-off in cryptocurrencies and other risk-on assets, and, most recently, the collapse of Binance’s offer to buy rival exchange FTX prompted a sell-off of BTC and alt-coins. But investors who were spooked into selling their BTC in past downturns have often lived to regret those decisions.

Ignoring short-term market fluctuations and focusing on the long-term outlook is not a strategy that is unique to the crypto world. Value investors like billionaire Berkshire Hathaway CEO Warren Buffett also ignore short-term market volatility and focus on the long-term picture.

The “Oracle of Omaha” famously encouraged investors never to own a stock for 10 minutes that they wouldn’t be comfortable holding for 10 years.

However, the difference between long-term value investing and long-term HODLing is the difficulty in accurately valuing cryptocurrencies.

Value investors rely on fundamental metrics like price-to-book (P/B), price-to-earnings (P/E) and price-to-sales (P/S) ratios to estimate the intrinsic value of a stock.

Bitcoin does not generate cash flow, revenue or earnings, and it’s not backed by assets that create intrinsic value, making it difficult to predict its long-term value.

Harry Turner, founder of The Sovereign Investor, says the key to Bitcoin’s long-term investing outlook is its leading market position and its fixed supply.

“HODLing is a good approach to Bitcoin investing if you believe in its long-term prospects and are prepared for some volatility along the way,” Turner says. “The same can’t be said for all other cryptos, however, as most of them will likely go to zero.”

Once-popular altcoins like OneCoin, BitConnect and TerraUSD are just three examples of cryptos that failed, generating a near-complete loss for any investors who employed the HODL strategy.

Several altcoins that soared during the 2021 crypto boom, such as Dogecoin (DOGE), Avalanche (AVAX) and XRP (XRP), are down more than 88% from their all-time highs.

Only time will tell whether they ever recover.



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