Do you HODL?

Good afternoon! Welcome to The Daily Moon. Can you believe we’re in 2023 already? Coming off 2022, we hope things will go to the moon. And today we will talk about two strategies to get to the moon. Let's go!

HODL or trade?

Let’s face it, crypto investors had a terrible 2022. But price fluctuations are nothing new for a crypto investor. Volatility and high risk-high rewards are things you know before you take the plunge. 

Once in the game, at some point in your journey as a crypto investor, you will have to consider whether you want to HODL or trade. Before we dive deeper into both approaches, let’s understand what each means.

What is HODLing?

If you’re a language purist, we understand your issue with a word that is clearly misspelt. The term was actually a typo made by a Bitcoin supporter in BitcoinForum in 2013. It has stuck and expanded into a meme – “hold on for dear life” or HODL. 

Things may not be as dramatic as all that, but holding on to crypto as a long term bet is increasingly becoming the preferred strategy for investors. 

What is trading?

Trading in crypto is almost the same as trading stocks. You enter and exit multiple opportunities the same day. But, like with stock trading, you need deep understanding and experience of the market. There is also the fact that the stock market is more mature and heavily regulated. These are still early days of crypto. 

Day traders need to use techniques such as technical analysis (TA), understand common indicators including volume, price action, and chart patterns to identify trade entry and exit positions. 

All things considered, day trading is risky. It requires fast decision-making and execution, and can be highly stressful. 

But we’re not trying to keep you away from it. Or implying that you can’t take risks. Everything depends on how you look at crypto as an investment. If it is a long term play for you, a holding strategy is the best option. 

What is a HODLing strategy?

Pretty straightforward. You buy a cryptocurrency, hold it in a secure wallet for a long time. You keep track of how the token is performing, and sell once you feel the investment has made a satisfying profit. The “HODLer” typically refuses to sell when there is a panic and remains unaffected by price swings.

This is, of course, a longer term strategy. Many long-term crypto HODLers look at it as a philosophy. They believe cryptocurrencies will eventually replace government-issued fiat currencies. If that happens, these believers win.

A popular HODLer strategy is called the dollar-cost average (DCA). Basically, you divvy up the money you would like to invest and buy small units of crypto over a regular period, whatever its price may be at the time. This saves you from the risk of paying more before prices drop. 

Is HODLing for you?

When choosing to HODL, ask these questions:

• Would you need to draw on these funds in the near future?

• Do you know your token well? Are you reasonably sure it is not a scam?

• Are you prepared to lose the entire amount if the market turns against your chosen token?

If the answer to any of these is no, HODLing is not for you. 

Because of the inherent risks involved in crypto trading, Bitcoin is often the safest bet for most traders. But even the largest cryptocurrency is not immune to price drops and crashes. It has over 75% this year from its high of $69,000 in November 2021. Still, given its credibility, it is an attractive long term investment for most. 

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Who are we? This newsletter’s ambition is to educate (and to entertain). The world of money is changing everyday and we want to help you decode what’s happening in the world of crypto, public markets in the US and India.