As an investor in cryptocurrencies, you have probably confronted the question, at some point, whether you should sell them for quick profits or retain them for the long run. Considering their pros and cons, neither of these tactics has an ultimate answer to this question. But in this article, we look at some of the variables that could influence your decision and help you decide which way forward is most appropriate to your goals and risk tolerance.
What is HODL?
Spelled as “hold,” the term “hodl” refers to buying and holding onto cryptocurrencies regardless of changes in the market. The phrase was born due to a misspelling in a 2013 post on a Bitcoin forum where one user said that he was “hodling” his coins irrespective of the market collapse. Since then, many cryptocurrency fans who are confident in the long-term potential of their assets have taken up the HODL meme and attitude.
However, trading entails making quick succession purchases and sales of cryptocurrencies, frequently in response to breaking news, technical analysis, or market swings. Traders attempt to profit from this erratic cryptocurrency market and increase their holdings by riding the waves of price fluctuations.
What can we do between HODLing and trading?
Both trading and hoarding possess pros and cons, depending on what you prefer to do, are good at doing, and can afford. Consider the following key points before you determine which strategy to follow:
Risk vs. Return: Hoarding can be viewed as less of a risk, but higher in reward since less time, stress, and effort are required when compared to trading. HODLers do not need to be concerned about payment for fees, taxes, or market reversals, nor about technological issues that could stand in the way of trading. In addition to airdrops, lending, and staking, among other benefits, they benefit from the long-term value of their assets. Hoarding involves various opportunity costs-the lost opportunity to benefit from the short-term fluctuations of your token’s price. Additionally, holding exposes investors to some elements of risk that come in the form of lost money through theft, hacking, or changes in regulations.
Whereas trading does take more time, energy, and stress compared to holding, as an activity, it is generally considered a high-risk strategy that brings in lower returns. Traders are supposed to execute trades and keep monitoring the market, while controlling their risk. Added to that, they must deal with taxes, fees, and technical issues that might affect their trades. Even as the market is working for you, trading can still serve as an efficient way to increase your profits via hedging and the diversification of your portfolio. Nonetheless, because trading exposes one to extra volatility, leverage, and human error, it is viewed as carrying a tremendous amount of risk. To be able to become successful in trading, one needs an immense amount of talent, experience, and discipline.
Time Horizon: Investors with a long-term time horizon-those who are prepared to wait for years or even decades before cashing out their investments-should consider HODLing. HODLers believe that, over time, the value of their coins would go up, and eventually, the cryptocurrency industry as a whole will continue to grow gradually in the future. They don’t give a damn about transitory losses or swings in prices.
Investors with a short-term time horizon—in a few days, weeks, or months—should trade. Rather than being so concerned about the future of the cryptocurrency market, traders look to immediately capitalize on its present prospects. They tend to go for more profit with less loss and be more sensitive to fluctuations in pricing.
Nature: A patient, optimistic, and resilient nature is right for HODLing. HODLers never lose hope in their investments despite the presence of unpredictability, volatility, and pessimism. They can also resist the urge to pursue additional currencies that may be more attractive or sell their coins before they are ready.
The most befitting attitude to trading is being analytical, versatile, and adventurous. In such situations, a trader may well use his instinct and information to adapt to any changing market situations and to calculate the risks taken. In addition, they are able to keep their emotions under control and to act in accordance with the trading strategy, not to act impulsively on the basis of either greed or fear.
Your finances, risk tolerance, and personal goals will determine whether you trade or hoard. You may be able to combine the two strategies by segmenting your portfolio into areas for long-term holdings and short-term trading. By doing this, you may take advantage of the best of both worlds while minimizing risks and maximizing profits.
Related posts:
Day trading vs. long-term cryptocurrency hodling … – Cointelegraph
What Does HODL Mean? | SoFi
What Does HODL Mean In Crypto? | Bankrate
