HODL: The EASIEST Bitcoin Strategy

| 2017-11-22
The performance of the cryptocurrencies – and Bitcoin in particular – has garnered the attention of swarms of new investors from across the globe. The opportunity of becoming the next crypto-millionaire is alluring, indeed. However, as anyone who has been investing for a substantial amount of time knows, it takes a while to figure out what you’re really doing and your personal risk tolerance. Let’s face it: Today’s average new investor doesn’t have money to lose. For this reason, it is important to have a strategy when entering an investment.

This article introduces an easy strategy that many Bitcoin investors have used since the coin’s market inception in 2009.

HODL (Hang On for Dear Life)

Without a doubt, the simplest approach any investor can take with Bitcoin and other cryptos is to buy and hold. Yep, that’s it. That’s the “secret formula.” Seriously speaking, buying and holding sounds like something easy to do, but for many it’s not. The reason is volatility.

From Investopedia, volatility “refers to the amount of uncertainty or risk about the size of changes in a security's value.”

In layman’s terms, you can think of volatility as the size of an asset’s price swings. In other words, you can be up one day, then down the next. The up and down action makes a lot of new investors nervous, especially since they are not used to it.

Unfortunately, Bitcoin and cryptos are normally volatile. But as you’ll see, this shouldn’t stop you. What really matters is the long-term results of an asset. As shown in the chart below, the long-term trend for Bitcoin is up. So, despite the temporary and occasional price drops, Bitcoin continues to reach new highs.

For the investor new to cryptos it must be understood that price drops do – and will – happen, but they are typically temporary. In fact, even with the pullbacks included, Bitcoin is up over 1000% for the year! Those are stellar returns.

A more involved strategy is to trade Bitcoins (i.e., entering a position when the price is low and selling at highs). However, this requires the ability to analyze charts and other data, which are advanced concepts. Some people are successful at trading, yet many others are not. Consider Warren Buffet’s words on attempting to time the market for trades: "People that think they can predict the short-term movement of the stock market — or listen to other people who talk about (timing the market) — they are making a big mistake."

The simplest strategy for cryptocurrency investors is to think “long-term.” There’s a saying that you aren’t a real Bitcoin-er unless you’ve been through a price drop. But a quick glance at any long-term Bitcoin chart reveals that the price typically bounces back – strongly! In cryptos, HODL is the name of the game.

Skip to toolbar