The Buy-and-Hold strategy is about leaving coins in your account for long periods of time. Your Buy-and-Hold portfolio’s value rises synchronously with those coin’s values.
This way you also save on transaction fees. This philosophy stems from the idea that the market is efficient. And that there is no reason sell coins prematurely, as the coins have the correct price.
In Crypto Buy-and-Hold is called “Hodl”.
The term was first used in a Bitcoin chat forum by someone
who decided not to sell, when Bitcoin made a big drop.
Instead of “I am HOLDing” he wrote “I am HODLing”.
The misspelling became a cult phrase.
People even “reverse engineered” it into the acronym:Hold On for Dear Life.
This is often exactly what it feels like to be a hodler.
Research shows that over long periods of time, Hodl results are not so good. Because you not only profit from bullish periods, you also get to endure all the bearish periods obviously. So Hodling is good as long as you enter at the right time.
But hodling works better in crypto than in “normal” markets, because in crypto it is much harder to time the market correctly. It is often almost impossible, because of the huge volatility in crypto.
It is very important to keep in mind that it is easier to make a loss, than it is to recover from that same loss.
If you for example lose 50% of your account, it would next take a 100% gain to recover from that loss.
| % Drawdown | % gain required to recoup losses |
|---|---|
| 10 | 11.11 |
| 20 | 25.00 |
| 30 | 42.85 |
| 40 | 66.66 |
| 50 | 100 |
| 60 | 150 |
| 70 | 233 |
| 80 | 400 |
| 90 | 900 |
| 100 | busted |
I really doubt the argument that the market is effecient (efficient markets hypothesis). Why would there be market crashes or bubbles? Think about all the emotional behaviour of investors and traders. Panics that cause price to drop hard. Or FOMO (Fear Of Missing Out) creating abnormal price pumps.
Also think about how fast people hear important news. It takes time for important news to reach you. And many people hear it too late. From this comes the popular phrase “Buy the rumor, sell the news”.
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