Crypto Investing
8 Feb 2022

Five Reasons to HODL Through the Crypto Winter

Ananda Banerjee

Have you ever seen a woodpecker prepping for the winter? It finds a dead tree, digs holes in the bark ever so carefully, and then stores the acorns it has gathered in it. Yes, it holds on to food for the long term and ensures that there is enough to last a challenging winter.

But woodpeckers aren’t the only ones “holding” on to investments. In a crypto market plagued with uncertainties, holding or “HODL”ing is probably the best way to survive and thrive. To know why read on.

Key takeaways

  • HODLing crypto means buying and persisting with it for a long, long time.
  • The HODLing time frame is somewhere between 5 to 10 years but can go farther than this.
  • HODL is an acronym for “Hold On for Dear Life”.
  • You can HODL crypto assets by putting your faith in the market blockchain’s future.
  • If you have started HODLing recently, the 30% tax slab shouldn’t be an issue for now.

We are already in the second month of 2022, and the crypto market continues to disappoint. The assets aren’t exactly hiding in a dark corner, but they aren’t coming out guns blazing either.

If you are a crypto trader or a short-term investor, you most certainly do not want to be in this situation. But crypto winter, as we know it, is nigh, and there isn’t much an active trader can do during these testing times. It is a phase where the market is at its slowest, characterized by poor volumes, skepticism, and erratic indications.

But there is a way out. And it’s called HODLing.

HODL has a certain history, which is what makes it so popular. In a crypto market grappling with uncertainties, volatility, and bearish vibes, HODL is one of the best strategies to stand strong.

There are several reasons why HODLing your crypto through the crypto winter is the best possible strategy. And that is exactly what we are going to discuss in this article.

What is HODL in Crypto?

First things first, HODL isn’t a term that you would find in your regular dictionary. Strictly a crypto slang and arguably the most popular one, HODL, completely unabbreviated, stands for “Hold on for Dear Life”. And while it makes sense unabridged, it primarily conceptualizes the act of holding crypto through difficult phases, only to sell it later at insanely higher levels.

HODLing a crypto asset is synonymous with holding it for a long time, i.e., 5 to 10 years at least. And as historical market performances would suggest, a 5 to 10-year time frame is often replete with several profitable exit points.

Origin of “HODL”: A Wrong that Turned Out Right

Yes, you guessed it. Initially, “HODL” was the misspelled form of “hold”. While the meanings of the words are analogous, the former is relevant only to the crypto space. However, the origin of this term hinges on an honest typo by a regular BitcoinTalk forum user who goes by the name of GameKyuubi.

Reasons to HODL Crypto

The mistake slowly snowballed into typo-laden banter, which eventually evolved into an insanely popular crypto expression. Also, the mistake was regularized and retrofitted as an acronym of “Hold on for Dear Life”, just to make sense.

“HODL Crypto” as a “Very” Long-Term Strategy

Trading in crypto is thrilling, indeed. But what happens when the market is so unstable that it fails to give you proper entry and exit points, and even if you can somehow enter an asset, the prices dip way too much to push you to a corner or make you exit with a sizable loss?

However, if you HODL crypto, you can weather the volatile phases, only to come out victorious in the end. HODLing is more than just projections, and if you want to know more about it, here is a piece worth checking out.

Five Reasons to HODL Crypto

Can’t you always learn the indicators better, identify key levels, and keep trading even when the market is acting up?

Why HODL when it just means blocking capital?

And why is HODLing is still a big deal when there is already a term called “long-term investing” around?

These are some of the pressing questions that we shall be answering while enlisting five reasons for HODLing crypto:

Market history

Did you know Bitcoin (BTC) was trading at $13 in January 2013? Hard to believe, right? If someone brought a few units of BTC at such a throwaway price, imagine how much it was sold for in November 2021. (You may remember that BTC touched $69,000 in November 2021.)

Now, this is a hypothetical scenario, albeit supplemented by facts. But it does help foreground the fact that HODLing gives your crypto assets a chance to grow. And based on the market’s historical performances, reliable assets always bounce back and scale newer heights.

Blockchain is the future

Blockchain isn’t just a buzzword. And naysayers must have understood this by now with the Indian government finally announcing its blockchain-powered CBDC. Expected to go on the floors by 2023, India’s CBDC is yet another blockchain use case that strengthens our faith in this godsend technology.

But blockchains are most effective in a decentralized realm, which then brings us to the bright future of relevant crypto assets. Long-term investingi.e., holding on to the asset for a year or even twomight not help you come close to what the future has in store for that project. However, a 5 to 10-year time frame gives you a lot to go on as different blockchains and their tokens will get enough room to grow and prosper by then.

Bear immune strategy

Every asset class goes through complete bear and bull cycles over the years to attain stability, credibility, and recognition.

Fact Check: Did you know that America’s first stock exchange, i.e. the Philadelphia Stock Exchange, goes way back to 1790? And only two years later, the New York Stock Exchange (NYSE) came to be.

Well, we can now imagine how many bear and bull cycles NYSE has had to sustain. The crypto market in comparison is an infant, and will be seeing several highs and lows on its path to stability. However, if you HODL crypto, you might be able to push through the difficult phases or bear cycles with relative ease. 

Minimum stress and capital requirements

If you are HODLing crypto, you can afford not to look at your portfolio ten times a day. Bagging an asset and holding on to it for dear life gives you the luxury to relaxsomething that traders and even investors find hard to get “HODL” of. Pun intended!

Also, you do not need to invest a lot as a HODLer. Regardless of when you enter an asset, HODLing always takes the bigger picture into account. Therefore, HODLing lets you play the long, waiting game, unlike investing and trading where substantial capital is required.

Not a “tax”ing strategy

Despite the Union Budget 2022–2023 welcoming crypto as an asset class, the 30% flat tax slab was met with mixed emotions. But then, only traders and short-term investors need to worry about the immediate effects of the introductory tax regime.

HODLers who have entered the scene recently can wait out this controversial phase. And by the time they are ready to sell, there might be a more lenient tax arrangement in place.

Note: The ideas mentioned here are speculative. Do your own research and do not consider this as financial advice.

When Not to HODL?

While HODLing is always cool, there can be a few exceptions along the way. Refrain from HODLing in the following scenarios:

  • If you have existing financial obligations in years to come
  • If you aren’t convinced about the growth prospects of a crypto project
  • If you expect quick returns
  • If patience is not a virtue you take pride in

Wrap-Up

Every Game of Thrones fan would know that it was Hodor who held the door long enough to eventually help the seven kingdoms beat the Night King and the “Winter”. Much like Hodor, the HOLDer in you can help beat the crypto winter, the bearish phase which might last a bit longer than expected.

And just so you know, crypto isn’t a sprint. It is a marathon. Besting it requires patience, tenacity, and the ability to brave difficult phases like the one we are currently experiencing.

FAQs

Q1. Is HODL a good investment?

A1. HODL is arguably the best form of investment as far as crypto is concerned. While it doesn’t give you the same kick as trading, it is the safer optionespecially if you aren’t sure where the market might be heading. And if you move forward with a HODLing mindset, you can always exit during the highs if and when the time comes.

Q2. Is HODL safe?

A2. Not just safe, HODL is literally airtight. However, the HODL safety net holds only if the project is reliable and has the potential to grow. Projects that do not solve specific issues or do not look promising can leave you a “bagholder.”

Q3. Can you buy crypto on HODL?

A3. While we do not recommend taking specific buy calls regardless of the investment strategy without DYOR, HODL is still relatively safe as it lets you wait out every challenging phase there is.

Does HODLing seem exciting? Well, you can always download the CoinSwitch App and start doing what HODLers do best; go the distance with crypto.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

writer

Ananda Banerjee

Content Writer

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