Each investor has a unique profile, be it conservative, moderate, or aggressive. In fact, there is no ideal strategy that suits everyone. For that, there are techniques that seek to balance risks and profit potential, among them Buy and Hold, or “Buy and keep”, nicknamed HODL in the cryptocurrency universe.
To decide how to invest in the different markets, a good knowledge of the assets and trade strategies is necessary. Among them, we highlight Day trade (purchases and sales throughout the day), Swing Trade (low frequency, medium term), Buy & Hold (buy and hold), and arbitrage (simultaneous trades with balanced risk).
It is important to understand how each strategy works to choose the one that best fits your profile. Buy and Hold, or simply HODL, is a long-term investment strategy, usually more than a year. In this case, the investor does not need to know technical analysis, nor have the time to follow the market, as in other strategies.
Rest assured that the Bitcoin Market, the leading exchange in Latin America, explains what HODL is, and what the advantages of this strategy are.
What is the expression HODL and how did it come about?
No, you did not read it wrong! The English word HOLD means to hold, or maintain, an abbreviation of the Buy and Hold modality for investments.
The term HODL, misspelled, originated in December 2013, when GameKyuubi user Mike from the BitcoinTalk discussion forum posted an outburst.
Mike had been drinking alcohol and was discouraged by Bitcoin's recent drop from $ 716 to $ 438, possibly because of news of repression from China.
Although he noticed the typo, he was angry with the situation, and decided to leave it as it was. Mike concluded that the best strategy at that time was HOLD.
What are the advantages of this strategy?
Buy and Hold is a long-term strategy, which has advantages and disadvantages. First, it is simple to perform, requires little time to analyze, and avoids the stress of having to keep up with the market at every moment.
One of the biggest advantages of this strategy in the cryptocurrency market is not having to make sales. With that, there is no need to pay fees, analyze metrics, or other time-consuming activities. You participate in the cryptocurrency market with little effort and without the need for technical or trade knowledge.
In addition, it is possible to make periodic purchases, regardless of market ups and downs. Thus, it is not necessary to wait for the best time to enter the market.
What are the disadvantages?
HODL may be less profitable in the short term compared to other modalities. The market may be close to the top, and it may be a good time to sell. However, this requires that the investor is monitoring and dedicating more time compared to the “Buy and Keep” strategy.
Another disadvantage is the risk of custody, custody of assets. Over time, many people forget their passwords or lose their backup copies.
For this reason, we recommend that tests be carried out every year to validate private keys, security backups, and access devices. Keep your private keys stored in secure locations.
What is DCA, and how does it facilitate HODL?
Dollar Cost Averaging (DCA) means average financial cost, a popular strategy in the crypto markets. The investor will buy a fixed amount in Reais at regular intervals, regardless of the quote.
That way, the investor buys more crypto when the price is low, and less when the price is higher. That is, what is fixed is the value in fiat currency.
This solution is perfect for dealing with the high volatility of this market. Believing that these assets will rise in the long run, buying a little bit every month is an excellent approach to managing volatility while maintaining the HODL strategy.
In short: is HODL a good strategy?
Yes, because even in the short term a good trader is able to maximize profits by reducing his position in bullish moments, there is no guarantee of success in these movements.
Therefore, for the vast majority of people, it is recommended to keep a long-term portfolio. It is worth remembering that by diversifying the allocation of assets with different risk vectors, the chances of loss become smaller.
In other words, even those who like to trade can benefit from maintaining part of the investments in HODL, or “Buy and Keep”, for a long term.
