HODLing vs Trading vs Strategic Investing

Two of the most commonly discussed approaches within the Bitcoin space are HODLing and trading using leverage.



HODLing Explained:

HODL stands for “hold on (for) dear life.” HODLing is the process of buying Bitcoin and holding it indefinitely without selling. When a person HODLs, he or she continues to hold onto his or her bitcoin no matter what happens to the price in the belief that the value will rise over time. This strategy has proven to be extremely effective for many people who have held their Bitcoin through several market cycles.



Bitcoin Trading Explained:

Bitcoin trading is the process of buying and selling Bitcoin in short-term time intervals in an attempt to make profits. With trading, a person places trades based on his or her opinion of whether the price will go up or down. Many people who participate in Bitcoin trading using leverage (margin) to magnify potential gains.



Which is the Better Strategy?

Both HODLing and Bitcoin trading have their merits. However, they each also have issues.

A person who HODLs has to experience the extreme volatility of Bitcoin's market cycles. The most recent down market for Bitcoin resulted in a 55% drop in the value of a HODLer’s Bitcoin holdings. This level of downward price movement can be too much for some people to take and some end up selling on the way down to “cash out.”

The reality on the opposite end of the spectrum with margin trading, is that the majority lose money. Over 90% of Bitcoin traders lose money over time. The reasons for this are explained elsewhere and are worth looking up if you are considering margin trading. In summary, it comes down to the risk you expose your funds to by using leverage. That risk is then magnified in the highly volatile crypto markets.



Strategic Bitcoin Investing Explained:

Strategic investing is a very useful mid-point between the extreme Bitcoin investing styles of HODLing and trading. Strategic bitcoin investing doesn’t use or have the risk of margin trading but it is more adaptable than simply HODLing. The idea behind strategic Bitcoin trading is that an investor can apply an understanding of market cycles and blockchain analysis to determine ideal times to buy or sell on a long (multi-year) time frame.

Nearly all of the charts on this site highlight conditions where, historically, outsized returns were achieved by buying or selling during certain times. These charts help people to adopt a strategic investing approach should they wish.

Any information on this site is not to be considered as financial advice. Please review the Disclaimer section for more information.