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Why You Should HODL Through the Dips

January 19, 2018 4:00 pm Published by

HODL is a key term on the growing list of cryptocurrency related slang. It originated in 2013 when a tipsy forum member made a thread entitled ‘I AM HODLING’ (a misspelling of ‘holding’) to declare his decision to hold Bitcoin no matter what. Other forum members immediately latched onto the term. HODL has stuck around and is now used as an acronym for ‘Hold On for Dear Life.’

HODL is more than a slang term though – it has become a philosophy centred on the belief that cryptocurrencies are the future and shouldn’t be sold during market dips. There are literally hundreds of stories out there of people who brought Bitcoin early on and sold it when the price reached a few dollars, not imagining it could get any higher. These stories, along with those of early adopters who have since become millionaires, add fuel to the philosophy of HODLING despite FUD (fear, uncertainty and doubt.)

What’s going on with the Bitcoin market?

The price of Bitcoin hit a low of around $9500 on Wednesday. As of the morning of Friday the 19th, it is recovering and hovering at close to $12,000. Ethereum also dipped to around $810 on Wednesday but is now above $1000 again. $10,000 and $1000 are key psychological barriers for many people, although there’s nothing magical about those numbers. However, other altcoins are still increasing in value so there’s no indication that cryptocurrencies are going out of favour.

The cryptocurrency market has always been volatile. That is in part due to its relative newness, but the last few weeks have been packed with significant events for the market. While it’s impossible to pinpoint the exact cause, there are a few events likely to have played a part.

  • Inside trading in South Korea. There have been reports of South Korean officials dumping their holdings to push down prices, leading to protests and petitions. South Korean state employees have since been banned from trading cryptocurrencies. However, no all-out ban has been issued and everyone else is free to trade as they wish.
  • The Visa Ban. Wavecrest bore the brunt of this with the recent pull back. Many prepaid debit card offerings have been temporarily seized both inside and outside the EU. We’re working on a solution to this and we’re really close to delivering new cards with our new card provider.
  • More people investing in altcoins. It seems that many of the 1300+ altcoins are growing in popularity, with a recent ICO raising a record-breaking $1.2 billion. It seems possible that many people are choosing to diversify their crypto holdings by buying altcoins in the hope that some may reach Bitcoin level prices.
  • Chinese crackdown on mining. It is believed that the Chinese government may be working to shut down the country’s largest mining community and to block access to exchanges.
  • It’s just that time of year. Bitcoin prices have historically dropped around mid-January. Some people have pointed out on Twitter that this is a time of year when many of us struggle financially, with tax season coming right after the heavy costs of Christmas. It could be the case that many people are selling their Bitcoins to cover their bills. January also happens to be close to Wall Street bonus season. There has been speculation that traders are dumping their crypto holdings to push down prices, enabling them to later buy them back at a lower price and make a profit when the market recovers.

Why is HODLING important right now?

Market crashes are often a vicious cycle

A rumour circulates or a price dips slightly. People panic and begin selling, overloading the market and pushing prices lower. Others see this and also sell, further lowering the price. The HODL philosophy is in part a means of protecting the market. The more people refuse to sell their Bitcoins, the less damage the market is likely to suffer. As many of those with the largest Bitcoin fortunes are determined hodlers, there’s a limit to how flooded the market can get.

Look at the bigger picture.

Yes, Bitcoin prices are dropping. But, despite this, the price is up by over 1000% since January 2017. And it’s up over 583,000,000% since 2010. Going from $0.003 to around $12,000 in less than 8 years is still a big deal for any investment, even if it hasn’t always been a smooth ride. The demand for (and interest in) cryptocurrencies is still growing and new practical uses are developing every day.

You’re probably seeing a lot of news articles full of CAPITAL LETTERS and exclamation points!!! declaring Bitcoin to be dead. Just keep in mind that these are written to get clicks, not to give an objective perspective.

We’ve been through all this before

Bitcoin prices have reached their annual low every January for the last few years.

The cryptocurrency market was declared dead at least half a dozen times in 2017 alone.

Yet Bitcoin has survived every dip and disaster so far. Provided you never invest more than you can afford to lose, there’s no indication that now is the time to stop HODLING.

 

This article has been published for educational purposes only and does not constitute as financial advice.

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