What is Hold Coin?
On December 18, 2013, an article titled "I AM HODLING" appeared on Bitcointalk, written by a person named GameKyuubi. Since then, the term "hold" or "hodl" has been widely used in the cryptocurrency market.
Hold coin refers to investors who buy and hold certain assets for a long time, believing that these assets will increase in value significantly in the future. This is considered one of the relatively safe investment strategies for cryptocurrency investors.
In the world of investing, holding and trading are two different disciplines. In particular, holding is considered a long-term investment, while trading is a short-term investment.
Why should you hold cryptocurrencies?
High Returns: If you choose to hold the right projects, the potential for future investment returns will be huge.
Providing a sustainable source of income: For some cryptocurrencies, you can stake or farm them while holding them, providing you with a sustainable side income or even compounding returns.
Safety: Holding is considered the safest way to invest in the cryptocurrency market. This investment direction will help you avoid facing many risks in trading.
Compared to trading, it does not require too much in-depth analytical knowledge.
Risks of Holding Cryptocurrency
Although considered a safe investment strategy, they also carry a number of potential risks, such as:
1/ Psychological factors
This is the biggest factor that can cause your holding strategy to fail. Often, FOMO (Fear of Missing Out) can make you make hasty buying decisions. One thing is for sure, when you are swept up in FOMO, you will buy coins at bad price zones. This can have a big impact on your future profits.
In addition, the cryptocurrency market is often affected by news and unofficial information. The spread of negative news and rumors may cause anxiety and panic among holders. This may affect your investment decision.
Therefore, in order to face psychological factors, you need to carefully study the project and develop a clear holding plan, such as holding time, selling price target, to avoid making emotional decisions. Patience and confidence in your own decisions are essential to help you cope with emotional turmoil and achieve long-term results.
2/ Price volatility
As you probably know, the cryptocurrency market often experiences price fluctuations. This can create fear and psychological stress. When the price of the coins you hold drops, it can cause anxiety and panic, especially for those who are new to the game.
So, back to the psychological story, you need to control your negative emotions and follow through with your original plan.
3/ Risks associated with the project
In fact, there are many risks associated with projects, such as dead projects, poor quality projects that should be deleted by multiple exchanges, projects that deceive investors, or projects that are hacked and cause huge losses, etc. These factors may cause you to lose all your funds. In addition, legal issues may also cause the situation to change quickly.
In order to avoid or reduce losses in time, you need to regularly update news about projects and markets. At the same time, you can refer to experts' analysis of the projects you are interested in.
A guide to safe currency holding
1/ Choose a reputable project
This is the first and very important step as it will directly affect your investment and future profits. For holding coins, you should choose projects with a long history of development and high security, such as Bitcoin, Ethereum, or BNB. Although the profitability of these types of projects may not be as high as hidden gems, new projects, and have a smaller market capitalization, the risk will be much smaller.
Here are a few things you need to keep in mind when considering holding a project’s tokens:
development team.
Technological potential.
Goals and vision.
Investors and supporters of the project.
The activity of the project and the community.
Financial and development planning.
Competitive Advantage.
2/ Choose a safe place to store your assets
For long-term holding strategies, you should store your assets in a cold wallet, such as Ledger Nano S or Trezor, to avoid the risk of attacks or online threats. In addition, you can also store it in a non-custodial wallet, such as Metamask, Trust Wallet, C98 Wallet, etc.
However, when using these wallets, you need to keep your recovery phrase (seed phrase) safe as they allow you to recover your wallet in case you forget your password. Also, you need to keep the software updated to ensure that your wallet always has the latest bug fixes.
In particular, you should not keep your assets on cryptocurrency exchanges as they are a prime target for hackers.
3/ Use two-factor authentication (2FA)
Using two-factor authentication for your crypto wallet will increase the security of your assets and make it more difficult for attackers to hack into your account.
How to optimize profits while holding
1/ DCA (average purchase price)
In order to optimize future profits, you should first buy cryptocurrencies at the lowest possible price. However, it is not easy to identify the low price zone, as it requires you to have good knowledge of technical analysis. So for "sideways investors" like most of us, the easiest way to optimize the buying price range is the DCA strategy.
DCA stands for Average Purchase Price. Using this strategy, you will split your funds and buy cryptocurrencies at different times. For example: you plan to spend $10,000 to buy Bitcoin and split it into 5 different purchases. The first time you buy Bitcoin for $25,000; the second time for $27,000; the third time for $20,000; the fourth time for $16,000; and the fifth time for $10,000. Therefore, after 5 purchases, your average Bitcoin price will be $19,600.
Therefore, when using DCA, properly dividing your purchase funds will help you buy cryptocurrencies at lower prices.
2/ Staking - Farm
Some crypto wallets (such as C98 Wallet) allow users to stake or farm specific cryptocurrencies. If you hold this group of currencies, you can use them for staking or farming to get more passvie benefits.
But it should be noted that although the farm provides higher profits than staking, if you don’t know much about it, it is best not to participate. The reason is that the risk of the farm is much higher than that of staking.
3/ Distribution Platform
When holding tokens of some exchanges, such as BNB, MX, BIT, etc., you can participate in the issuance platform of the exchange. This is considered a compound interest investment method.
People who have achieved success while holding cryptocurrencies
Changpeng Zhao (CZ)
The most famous figure among them is Changpeng Zhao (CZ), the founder of Binance exchange. In an interview, he said that he bought a large amount of Bitcoin with BNB in 2014, and he still holds most of it today. According to CZ, a large part of his net worth was created by the growth of these two assets.
Despite the significant drop in the cryptocurrency market in 2023, as of June 2023, CZ is the 163rd richest person in the world according to Forbes.
This success is the clearest evidence of his own statement: "If you can't hold on, you can't get rich."
Vitalik Buterin
An equally famous figure is Vitalik Buterin, the founder of Ethereum, who is considered the youngest cryptocurrency billionaire in the world. According to figures revealed by Buterin, he holds more than 3,000 Ether (ETH). When the market surged in November 2021, his Ether was estimated to be worth more than $1.6 billion.
In addition, there are many other personalities like the Vickros brothers, Tim Draper, Brian Armstrong, etc. One thing all of these personalities have in common is that they all keep a small portion of a coin holding strategy in their portfolio.
In fact, there is another old coin holder whose name is among them, that is Satoshi Nakamoto, the creator of Bitcoin. Although he has disappeared since 2010, this person may have as many as 1.1 million Bitcoins. According to the data, many analysts claim that Satoshi Nakamoto has never sold a single Bitcoin.
Frequently Asked Questions
1/ When should I hold cryptocurrencies?
You should hold cryptocurrencies when the market enters a downtrend. Note that you should diversify your investments and buy at different times to optimize the purchase price, this buying strategy is also known as DCA (Periodic Dollar Cost Averaging).
2/ Which cryptocurrency should I hold?
You should choose cryptocurrencies that belong to projects with a long history of development and high security, such as Bitcoin, Ethereum, or BNB.
3/ How to allocate the portfolio holdings?
You shouldn’t put all your eggs in one basket, so you should diversify your investments. Here’s a good allocation for you to consider:
80% is used for cryptocurrencies like Bitcoin, Ethereum, etc. which are very secure.
20% is used for potential stocks or small-cap currencies.
Summary
This article introduces you to the currency holding strategy and provides you with a method to successfully hold it. I hope the above information can help you find an investment direction that is more suitable for you. Please use this article as a reference, not as investment advice.
