Bitcoin, the world’s first and largest cryptocurrency, has garnered considerable attention in recent years. With its decentralized nature and increasing global adoption, many investors have entered the market seeking to make a profit. However, the decision on whether to trade Bitcoin daily or HODL (hold on for dear life) has been a subject of much debate. In this blog post, we’ll explore why HODLing Bitcoin is a better strategy than trading daily, especially if you are not a professional trader.
What is HODLing?
First of all, let’s define HODLing. It’s a term that originated in 2013 when a Bitcoin investor made a typo on the BitcoinTalk forum. Instead of spelling “hold,” he typed “hodl,” which has since become a popular acronym in the crypto community. Essentially, it means that you purchase Bitcoin and hold onto it for the long-term, regardless of short-term price fluctuations.
Why HODLing is a winning strategy?
The primary reason why HODLing could be a better strategy for non-professional traders is that it’s less risky. Daily trading involves buying and selling Bitcoin regularly based on market trends and news. However, it’s difficult to predict the direction of the market, and short-term price movements are notoriously volatile. The market can move in both directions, and making wrong predictions could lead to significant losses.
On the other hand, HODLing Bitcoin means you don’t have to worry about short-term price swings. You hold your Bitcoin through market dips, price crashes, and even bear markets. Bitcoin has a track record of recovering from such corrections and continuing its upward trajectory in the long run. Therefore, if you believe in the long-term potential of Bitcoin, HODLing means you don’t have to make constant trades and it frees up your mental space and avoids anxiety.
Another advantage of HODLing Bitcoin is that it allows you to benefit from long-term gains. Bitcoin is known for its volatility, but it’s also known for its long-term appreciation of value. Since its inception in 2009, Bitcoin has seen an astronomical rise in value, from a few cents to over $60,000 at the time of this writing. The value of Bitcoin has had highs and lows, but its overall trend has been upward. Therefore, holding Bitcoin for the long term allows you to benefit from this trend instead of worrying about daily market fluctuations.
Furthermore, daily trading incurs unnecessary fees and taxes. For instance, every time you trade Bitcoin, you have to pay exchange fees, which can range from 0.1% to 0.5% per trade. These fees may seem small, but they add up over time, and daily trading could result in significant costs in the long run. Additionally, every trade you make generates a taxable event, which can be complex and costly to track. HODLing Bitcoin foregoes the constant trading commission fees and reduces your tax bill.
HODLing and the Philosophy of Bitcoin
HODLing Bitcoin also aligns with the cryptocurrency’s underlying philosophy of decentralization. The beauty of Bitcoin is that it’s a trustless system that operates independently of governments, central banks, and financial intermediaries. Daily trading, however, involves using centralized exchanges, which require traders to place their trust in these intermediaries. These exchanges can be vulnerable to hacks, downtimes, and even bankruptcy, resulting in significant losses to users. When you HODL Bitcoin, you maintain full control of your funds, and you don’t have to trust third-party intermediaries.
Finally, HODLing Bitcoin allows you to avoid the psychological pressure of daily trading. Day traders exhaust their energy and attention by constantly monitoring the price swings, news outlets, and social media to make informed trading decisions. This process can be emotionally exhausting and can cause significant anxiety, especially if you’re not a professional trader. In contrast, HODLing Bitcoin frees up time and mental energy so you can focus on other things in your life. Additionally, you can avoid making rash decisions based on fear, greed, or market pressure since it doesn’t require you to pay attention to short-term fluctuation.
In conclusion, HODLing Bitcoin is a practical strategy for non-professional traders to invest in Bitcoin without the unnecessary risks associated with daily trading. By holding Bitcoin over a long-term horizon, you avoid the costs associated with daily trading, benefit from long-term gains, and align with Bitcoin’s underlying philosophy of decentralization. Moreover, by holding Bitcoin, you can avoid the psychological pressure of daily trading and free up time and energy for other valuable activities. For anyone looking to invest in Bitcoin, HODLing could be a wise decision, especially if you’re not a professional trader.