Those who are at least a little interested in the cryptocurrency market have met the term HODL. What is it and why it is anticipated that everybody will start HODLing?
What is HODL?
If you explain as simply as possible, it is one of the strategies for working with cryptocurrencies. Its essence is to buy tokens for long-term storage instead of constant trading of them. This approach assumes that despite the ups and downs, the coin in the future several years in any case will cost more. Even if we do not take the example of the first cryptocurrency Bitcoin, all the top altcoins have become more expensive since their launch.
Why HODLing will start soon?
From November 2020 Bitcoin has been on its historical-maximum path. The world’s largest cryptocurrency was going and showed no signs of slowing down. It is doing perfectly even now but the price is going down relatively, compared to the past period and gamblers are going to become more active. And as we are talking about Bitcoin gambling this field is rapidly developing. If we take a look at a review done for mBit crypto casino we can clearly see that Bitcoin is frequently used for gambling. Gambling doesn’t count as trading so it's going to classify as HODLing.
Pros and cons of HODL strategy
One of the most important points that the adherents of this approach note is the preservation of nerves. HODLing involves buying a coin, after which you should "forget" about it for a long time and not check the charts every day, as traders do.
Another plus is that when you go, you don't have to improve your trading skills, which are important for short-term trading. Graph analysis, finding the perfect entry point and other points are not so critical. If the project is serious, the probability of fixing profits at a distance of a couple of years is very high. How much income will be, this is another question.
There are drawbacks to any strategy. The key in this case is the possibility of losing the invested funds. Despite the fact that the statistics of the development of most serious cryptocurrencies confirm the maximum probability of price growth within a few years, for a number of reasons this may not happen.
First, an inexperienced participant of the crypto market can try to go to the hype when the coin is already overbought, and its cost is clearly overstated. A perfect example is the fall of 2017, when bitcoin was rapidly rising, almost reaching the $20,000 mark in the winter. Many traders bought "on the hay" in the hope that the price would grow further but eventually got into a serious drawdown.
To avoid this, it is very important to analyze the overall situation in the market, as well as the dynamics of the price of a particular coin.
Another reason to lose an asset is its depreciation. Any cryptocurrency is part of a project based on blockchain technology. Over time, the market may have a better solution or even be implemented in one of the top altcoins. There are enough examples.
The size of the yield, too, some may consider a minus. Holding the coin for several years, you can get on the output 10 times more. But trading violas, given the high volatility of the market, you can earn a lot more. But this requires enough knowledge and experience, otherwise, there is a risk to drain your entire deposit.