Although it could be, HODL is not the acronym for “Hold On for Dear Life”, the term has its origin in December 18, 2013 in the Bitcoin Talk forum when the user GameKyuubi writes an entry titled “I AM HODLING”doubting his nature as a trader and stating his admiration for those who say they are capable of predicting movements in the price of bitcoin. That typographical error in the word HODLING where the letters D and L dance quickly became viral and the term hodl perpetuated.
A trader is the person who trades short taking advantage of what he believes are the best times to buy and sell stocks or cryptocurrencies and thus make profits and mitigate losses. In contrast we would have the hodler who is the one who chooses to invest in a digital asset buying regularly over time and storing it waiting for it to revalue.
Like GameKyuubi I do not believe that in bitcoin trading, it is a good way to lose BTCs and where the 90-90-90 rule applies, 90% of new participants lose 90% of the money in their account in a maximum of 90 days.
Trading in bitcoins for neophytes does not work, it is enough to compare the recommendations of the supposed experts with the subsequent behavior of the market, they are wrong, neither do the most used indicators of technical analysis such as moving averages, RSI (Relative Strength Index), retracement. Fibonacci bands, Bollinger Bands … Whales carry a lot of weight in the Bitcoin market, they are knowledgeable about the typical technical analyzes that traders follow and it is very easy for them to provoke trends in the short term. Everyone will value but the risk of loss when trading in this market is high.
On the other hand, the Hodl strategy is simple and if it works, to date the trend in the price of bitcoin has been upward, there is high volatility in the short term but its trajectory in the medium and long term is clearly upward.
Buying small amounts on a regular basis in an asset like bitcoin that is highly volatile has the advantage of ending up averaging the purchase price. Sometimes luck will be with you and you will have to acquire the BTCs when the price is low and others on the contrary you will buy in the ascending period, in the long run some will be compensated with the others and you will end up having an average purchase price of your BTCs. This way of operating is called DCA (Dollar Cost Averaging Into Bitcoin) and just as it is highly recommended to accumulate BTCs, I do not consider it as interesting to do with the Dollar or with the Euro since its value decreases over time.
When, on the contrary, you buy very few times but a large amount of bitcoins you do not have that averaging factor and you will be exposed to price volatility.
Bitcoin P2P platforms
A common way to hodle is to buy a reasonable amount weekly according to your income and do it in a place where you are not required to identify yourself, that is, without KYC (Know Your Client) to favor your privacy and do not have custody of your bitcoins , the sale is made between individuals. There are several sites where it operates as well as bisq, hodlhodl…
There are those who prefer to automate the purchase and use an exchange for the purchase and the possibility that they offer to launch periodic purchase orders. In these cases, it is advisable from the point of view of security and privacy is once purchased to send them to a new address of a wallet that has the option of making CoinJoin such as Samourai wallet and then send them to an address generated in your hardware wallet.
Hodl Trading Bitcoin
Finally and the most profitable from the economic point of view is to make the purchase through a trading order, taking advantage of the fact that historically the trajectory of the price of bitcoin has been upward. Reviewing the percentage of days in the history of Bitcoin in which buying BTCs has been profitable for investors at the current price, it is 96.2%.
Instead of buying directly, a purchase order is registered for a lower price, for example at 95% of its current price, if in the period until the next purchase the price of BTC falls below that threshold the order is executed by making the purchase at a lower price than we would have bought directly if, on the contrary, it was not executed, we make the purchase at the market price and place the next purchase order. In addition to the advantage of having bought at a lower price, we have that purchase orders on traders’ sites have no commission and immediate purchase at market price does.
To clarify the operation, let’s take an example, let’s imagine that we buy BTC every Monday.
BTC Price: $ 10,000
Limit Price: $ 9500 (95% of BTC Price)
Amount: 0.002 (20 / BTC Price)
In the Trader
If the following Monday the purchase order has not been executed we have to make the manual purchase of the BTCs with the $ 20 and we will also place the next purchase order.
The benefit of the Hodl Trading technique comes when the order is executed since in that case we have bought at 5% cheaper than we would have done if we had made the purchase directly.