Crypto Investing
5 Jan 2021

What Is HODLing & Why It Might Be Better Than Trading?

Farheen Shaikh

HODLing is the most widely used term in the cryptosphere. It is used to express one’s interest in a specific coin irrespective of market conditions.

Before we move ahead, here’s an interesting story behind misspelling holding as HODLing

Way back in 2013, when Bitcoin has just started to pick up the pace, somebody named GameKyuubi while conversing at a Bitcoin Talk forum drunkenly wrote, “I AM HODLING” instead of ‘I AM HOLDING’.

What he meant was despite the price drops, he is still holding onto his Bitcoin but accidentally messed up with the spelling. Since then the witty cryptizens have made it a part of the crypto vocabulary.

Now that you know what HODLing is and why is it misspelt. Let’s move back to the topic:

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A HODLer is anyone who believes that investing in cryptocurrencies is beyond making a quick buck.

They make decisions not just based on charts but also consider the projects that the network works on. While a Trader goes by the charts and invests in assets for instant profits.

In crisp: HODLers look at the cryptocurrency market as a marathon while Traders look at it as a sprint.

But before we draw any conclusions, let us first understand what pulls HODLers to cryptocurrencies.

Why HODLing Is Better Than Trading?

Let me ask you a quick question, how do you think these cryptocurrencies derive value?

Your most instant reply would be – demand and supply.

While that is true to an extent, another factor that plays a significant role in determining a cryptocurrency’s value is its utility.

Each cryptocurrency is attached to a project being built on the blockchain network. These projects are nothing but people in a decentralized network trying to solve a real-world problem through advanced tech.

Look at it this way: Ripple is a payment solution, solving the problem of instant cross-border transactions for financial institutions, and XRP is the native token of the network.

Being a HODLer means when you buy XRP, you are not just buying a digital asset but also indicating your belief in Ripple’s solution.

Thus, understanding that any iterations, introductions, and partnerships that happen on these networks will affect XRP’s price.

In a nutshell: Believing in cryptocurrencies means investing in projects that you firmly believe in and thus looking beyond the charts.

Why & How Does HODLing Have The Edge Over Trading?

Like how shares are a way for you to invest in a company that you believe in, investing in cryptocurrencies is also a way to show your belief in a project.

And as the network you invest in becomes stronger with effective partnerships and robust solutions, people will adopt its solutions. The growing adoption of these solutions will mean more people eager to buy cryptocurrencies on the network, resulting in greater demand and increasing the cryptocurrency price.

HODLers have a knack for getting into these details, make rational choices, and thus leverage this aspect of cryptocurrencies that traders often don’t get into.

Another way to look at this is:

The crypto market is highly volatile, and the charts will show multiple trends throughout the day, resulting in traders making more emotional choices. On the flip side, Charts don’t much affect the HODLers because most often the dips are temporary.

A trader holds for a very brief period, doesn’t allowing more time for their investments to grow before selling it, which leads to no substantial profits.While in contrast, a HODLer holds are for significant periods, giving enough time to their assets to unleash its potential.

When you trade frequently, market volatility affects your assets more because the time frame is shorter. In contrast, HODLers are prone to have a lesser impact by mark volatility.

Are You a HODLer or a Trader?

HODLers and Traders both have a very different approach to devising their strategies in the crypto market. Not to say that one is better than the other, but we have seen the difference.

In my view, Trading is not for everybody; it is only for those working with the capital that they are comfortable loosing. It is always best to stay invested for long and reap substantial benefits rather than aspiring to make quick returns with heavy risks.

But, what is best for you varies based on multiple factors that we have discussed throughout. But I expect that this blog has given you an idea of what it looks like on either side.

So, Which side are you on?

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

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.


Farheen Shaikh

Content Writer

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