Over Short-Term Profit

HODL is a phrase used by cryptocurrency investors who refuse to sell their coins regardless of price fluctuations. It’s more common during a bear market when people refuse to sell their currency. According to a study by Bakkt, the majority of cryptocurrency investors in the United States prefer hodling over taking short term-profits from the market. 

The survey which was fielded in July 2021 gathered data from over 2,000 Americans who had either started exploring or investing in cryptocurrencies in the last six months. It also included those who plan to invest in the next six months. 

The findings shed light on how people like to use digital assets in their daily lives, and also the attitudes that drive their cryptocurrency habits. 

Findings

Notably, the majority of US residents who own cryptocurrency – 66% – are 44 years and under. People between the ages of 18 and 29 own more cryptocurrencies at 40% while those from 30 to 44 come next at 29%. This shows that young people are a lot more enlightened about cryptocurrency than others.

Interestingly, those between the ages of 30 to 44 own the most cryptocurrency in value. At least 30% of the 29% own cryptocurrencies worth more than $500. Nevertheless, the majority of all cryptocurrency investors in the US limit their investments to $100 or less. 

From the overall results, most participants plan on long-term investments while others own cryptocurrency to make online purchases, make in-person purchases, and others. Breaking it down:

• 28% own cryptocurrency for long-term investment (hodling)
• 16% use cryptocurrency as it attracts low fees 
• 14% use cryptocurrency because it’s easy to access
• 14% own cryptocurrency for fear of missing out (FOMO)
• 14% own cryptocurrency because it’s not controlled by the government 
• 14% own cryptocurrency for other reasons 

Whereas long-term return is crucial to all age groups, 18-29 also value ease of access, while 30-44 value the lack of centralized control. Low fees are second to long-term returns for 30-44-year-olds. The report did not state whether surveyed people invested in Bitcoin, Ethereum or other altcoins. No matter which, according to CoinCodex, the price of two leading coins by market capitalizations; Bitcoin and Ethereum are now at $45 000 and $3139 respectively.

Challenges

Most investors prefer hodl over short-term gains but it doesn’t go without the challenges. The volatility of the crypto market and lack of information on how to start investing are the two largest participants’ concerns. 

The former is a major concern for the men while the latter is a major concern for the women. Notably, no age group is significantly bothered about the price of cryptocurrencies.

Also, 35% of respondents indicate they don’t know anything about blockchain and majority of them are women. Nevertheless, 30% of respondents are relatively confident that they’ll get a good return from their investments. 34% are neutral in that regard.

Why Is HODL Popular?

Most people that buy cryptocurrencies for short term aren’t much concerned with utility; instead, they focus on price history. For instance, they will prefer to buy an altcoin like Dogecoin, which, in comparison to other cryptocurrencies like Bitcoin, offers no significant advantage. 

They acquire such coins when the price is in an upward trend in hopes of making quick profits. This approach can generate profit for investors, but it is advisable to buy and hodl your crypto. 

Hodl investors have more protection since they don’t deal with the short-term price volatility. It reduces the risk of purchasing high and selling low. Furthermore, it’s ideal for those getting into the market for the first time. 

With short-term investment, you have to be conversant with day trading which can be technical and consumes time. Hodling has no steep learning curve. You can simply buy coins and forget about them; you don’t have to invest time.

The HODL Disadvantage 

A major disadvantage is the hodler’s reluctance to leverage cryptocurrency’s volatility. Short-term trading doesn’t rely on the promise of a major spike in the price. Also, hodling implies crypto aren’t being used for their original purpose. When Satoshi Nakomoto developed Bitcoin and implemented the first blockchain in 2009, the original purpose was as a form of payment. 

Since the majority of people don’t use it as a means of payment, the number of businesses that accept crypto are progressing slowly. In other words, hodling crypto creates roadblocks that affect global adoption.

Takeaway

The crypto market is notoriously unstable, creating as many millionaires as it destroys. That should give you a good understanding of the level of risk involved in entering the cryptocurrency industry. Intuition and expertise are the only tools that can help you succeed in any investment. It’s no different with the crypto market. 

For hodl investments, it’s ideal to stick to the leading crypto assets by market capitalization. This includes coins like BTC, XRP, and ETH. It can be tempting to invest in new crypto assets gaining massive value, but the cryptocoins can fall just as quickly. 

Finally, investing large sums in cryptocurrency might be appealing, but can be devastating for hodlers. Only invest as much as you can comfortably lose.

Source: Plato Data Intelligence