“Hodling” refers to the strategy of buying Bitcoin and simply waiting. It is a form of passive investment that expects long-term returns and ignores short-term volatility. First of all, it requires patience. Second, it requires optimism. The good thing is that it could become quite profitable. Plus, it saves you work and headaches. The bad thing is that it is a slow process whose happy ending is not guaranteed. And the ugly thing is that it misses the benefits of volatility.
Hodlers generally have a good image, because the strategy requires discipline, stability and commitment. The strategy is simple to promote. And it’s simple to manage. Additionally, it is the perfect excuse to appease the malcontents in times of adversity. One simply has to “hodling”. Don’t Worry Be Happy. It’s not uncommon to publicly shame non-hodlers for selling out early. This “shaming” activity is particularly common during a capitulation. “Hodl!” This pressure occurs because the holders are necessary for the stability of the system.
Of course, in the case of Bitcoin, the buy and wait strategy has been very successful. Investors who sold prematurely have indeed missed out on a great opportunity. Bitcoin has, without a doubt, been very generous to patients. However, it all depends, of course, on the time of purchase and the purchase price. People who bought in 2013 are surely very satisfied today. However, people who bought in December 2017 may not be feeling the same way. During a boom, people generally buy high. Which implies that they should stay in the red for a long time during a bearish cycle. How many people bought at $68K? How long must they wait now? We know what we had to expect in the past. But we don’t know for sure what we will have to wait for now to break that high again.
Here is a secret of this business. It is well known that promotion is of vital importance for this industry. The bitconer knows very well that it is part of his job to sell Bitcoin as the eighth wonder of the world. The press, exchanges, miners, crypto companies, whales, influencers, and analysts are stakeholders. In other words, we are all interested in keeping the enthusiasm alive. Because what generates the purchases is the feeling. This market feeds on greed. And greed must be kept alive with promises. Therefore, the bitcoiner is always on the campaign trail.
The problem is that a campaign aimed at the masses must be managed simple and emotional. Nothing complicated. What is sold is a dream. We can see this on Twitter. Short, forceful sentences written to create a false sense of certainty. The reader always feels a natural inclination towards the propaganda that is presented to him. He likes to hear what he wants to hear. What do you want to hear? The archetypal story of Aladdin. It is about a young outcast who by chance finds a magic lamp with a genie inside that fulfills all his wishes. The Bitcoin dream is a dream of great riches.
The wisest thing, however, is invest defensively. Certainly, it is very tempting to invest, because we feel part of a community or part of a movement. In other words, being an investor by identity. Faith in a narrative is important. But skepticism can also become our best friend. Buying and waiting is very tasty during a bullish cycle. But it is not so during a down cycle. That means Bitcoin does require some proactivity. Absolute passivity is not always convenient in the case of such a volatile asset. For example, it is a good idea to take profits in an up cycle. And it would not hurt to buy a little more during a down cycle. In other words, certain adjustments are necessary from time to time.
Defensive investing means that you also we must prepare ourselves not to lose money. This is not about being bearish or pessimistic. It is about designing a diversified and balanced portfolio, weighing risks and opportunities. The intention here is to obtain sustained growth and, at the same time, stability. Consequently, we must be more pragmatic than fanatical. We should worry more about our pocket than about the dogmas of a community of believers.
What does this all mean? It means that before hodling we must put our house in order first. Sometimes it is necessary to sell to pay debts. Sometimes it is necessary to sell to solve unexpected emergencies. The point is that the expenses are daily. We eat every day. And we need to buy things every day. Unfortunately, it is in times of “recession” that we most need stability in our reserve fund. In order to wait for an eventual price recovery, we must be very sure that we have the capacity to wait, without major problems, the required time.
What is your income? What are your expenses? What are your debts? Could we tolerate more falls? Could we wait the number of years that recovery might take? How are the reserves in fiat? Suppose that next year a daughter leaves home to go to college. We have the money, but in this case, maybe the best thing is not to buy Bitcoin and wait. It is possible that The most sensible thing is to place that money in more stable options to avoid a family problem.
Bitcoin is great as an investment. But, at the same time, we cannot go crazy. The worst thing we can do is put everything in one basket and wait at all costs. Having a more moderate attitude definitely has its benefits. That usually means having the right percentage of bonds, fiat or stablecoins in our portfolio. This is achieved by taking profits on the up cycle. And not buying everything during down cycles.
On Twitter, we are always going to be told to buy at all times. Nevertheless, our first responsibility is with our pocket. Many fall into fanaticism, because it feels great to be part of a community. It happens with religions. It happens with politics. And it happens with Bitcoin. But it is essential that we make financial decisions with a cool head. On many occasions, it is necessary to reorganize our positions. On many occasions, it is necessary to adapt to the new times in order to preserve our lifestyle and fulfill our obligations. Buy and wait is an excellent strategy. But, above all, we must know how to buy and how to wait in the best possible way.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
It may interest you:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.