In recent years, crypto investment has experienced rapid growth, especially regarding ownership of this digital asset. Some popular crypto assets are Bitcoin, Ethereum, and others.
The crypto investment refers to buying, storing, and managing crypto digital assets. Therefore, in investing in crypto, various strategies need to be known, one of which is holding.
A hold strategy means buying crypto assets, then holding them for a longer period in the hope that their value will increase over time.
However, it is also important to understand the risks and potential benefits before implementing a hold strategy. The reason is it will help investors to be more emotionally prepared to deal with fluctuations in the crypto market.
So, to better understand the advantages, disadvantages, and risks, see the full review below to understand what hold is.
What are Holds?
Please note, hold is a verb from the English language which means ” to hold, “to hold,” or ” to maintain.” Therefore, the notion of hold, in general, is an action not to change the position/ownership of something for a while.
The definition and origins of the term “hold” in the crypto world
The meaning of hold in crypto means the strategy of holding/saving crypto assets for a longer period without carrying out active trading.
The term hold or HODL in the crypto world has an interesting origin. Its origins can be traced to a thread on the BitcoinTalk forum uploaded by a user named “GameKyuubi” on December 18, 2013.
He wrote the subject in that thread with a unique title, “I AM HOLDING.” He intended to write, “I AM HOLDING.” Because of a typo, he also typed “HODL” instead of “HOLD”.
Crypto community members then adopted the word HODL to describe the strategy of holding/storing crypto assets for longer.
HODL is also translated into the acronym “Hold On for Dear Life.” This term also refers to an investment strategy reflecting crypto holders’ confidence and resilience against market fluctuations.
Advantages and Disadvantages of Hold in Holding Crypto Assets
After knowing the definition of hold, now is the time to discover the advantages and disadvantages of holding crypto assets.
This strategy of holding crypto assets longer has several advantages and disadvantages for crypto investors. You need to know some advantages and disadvantages of the hold strategy in holding crypto assets.
- Long term gain
One of the main advantages of the hold strategy is the potential for long-term gains. Although the price of crypto assets can experience significant fluctuations in a shorter timeframe, many investors believe that cryptocurrencies have long-term growth potential due to the adoption of blockchain technology and the potential for wider use in the future.
- Reducing stress levels
Adopting a hold strategy can also reduce the stress and anxiety related to price fluctuations often occurring in the crypto market. By not actively trading/trying to profit from short-term price changes, investors can avoid the mental stress that often occurs when trying to speculate on the market.
- Avoiding Short-Term Price Fluctuations
As is well known, crypto asset prices can fluctuate sharply in a shorter period, especially due to the relatively low market liquidity compared to traditional markets.
As for the hold strategy, investors need not worry about short-term price fluctuations and can ignore the temporary volatility of their assets to focus on long-term growth potential.
- Market Volatility
The crypto market is known for its high price volatility, which refers to large and fast price fluctuations in a short period. Although the hold strategy aims to make long-term profits, this volatility can lead to sharp price swings in a short period.
Crypto asset prices can go up quickly in a certain period but can also experience a drastic decline in a short time. Such market volatility can cause anxiety and mental stress for crypto holders, especially if unprepared for extreme price fluctuations.
- Security Risk
A hold strategy can also cause security risks in several ways, including storing crypto assets for longer periods in insecure wallets or exchanges; it can increase the risk of losing assets due to potential hacks or security attacks.
In addition, there is also a risk of loss opportunity to profit from price fluctuations. During periods when crypto assets are rapidly increasing in price, there are opportunities to sell them and secure profits. However, the opportunity may be missed with a hold strategy because the asset is retained in the portfolio.
- Hold Risk
You already know the advantages and disadvantages of a hold strategy in holding crypto assets. Furthermore, it is also important to know the risks of holding.
It is important to understand that this hold strategy also has certain risks to which investors must pay attention. The following are some of the risks of holding that you need to know, including:
- Opportunity Cost
Opportunity cost is a risk that means that by holding or holding a crypto asset for a longer period, investors will likely miss out on a better investment opportunity elsewhere.
When an investor’sinvestor’s crypto-assets do not move or even experience a decrease in value, they are likely to experience potential losses because they do not take advantage of investment opportunities that can provide better returns. This is especially true if other assets are experiencing higher price increases and are pursuing other, more attractive investment opportunities outside the investor’sinvestor’s portfolio.
It is also known that holding strategies do not guarantee profits and can cause losses if the value of crypto assets held by investors experiences a significant decline over a longer period.
As is known, the crypto market is very volatile, and the price of crypto assets can change quickly. Therefore, if investors hold crypto assets during periods of sharp price declines, they run the risk of incurring large losses.
When Should Hold Be Done?
After knowing the risks of a hold strategy, now is the time to find out when to hold. This ” skill ” is important in the investment world, including in crypto assets.
It is also important to note that a hold strategy in holding crypto assets can be a good choice in certain situations. The following are a number of situations when a hold should be exercised, including:
1. The price has not touched the take profit/cut loss target
If an investor has predetermined take profit targets and the crypto asset’s price has not reached any of those targets, then a hold could be a wise choice. This strategy allows investors to allow their crypto assets to touch and achieve the profit targets that they have previously set.
2. Believe that the price reduction is temporary
When investors believe that the decline in the price of the crypto asset they hold is temporary and that the asset has long-term growth potential, a hold strategy can be a reasonable choice. That is, investors believe the price will recover from the decline and experience an increase.
3. Believe in long-term fundamentals
Suppose investors believe that the crypto assets they hold have strong fundamentals and the potential for broad use in the future. In that case, the hold strategy is certainly on the long-term beliefs of these investors. In this situation, investors prefer not to be affected by short-term price fluctuations and focus on growing the asset’sasset’s long-term value.
In conclusion, understanding the risks and benefits of holding before investing in crypto is very important. The reason is that crypto investment offers great profit opportunities but has high risks.
On the other hand, it is also necessary to understand that every investment strategy has risks, and a mature investment plan is important in the investment world. It will help investors manage risk, get clear investment goals, and avoid emotions in investing.
Therefore, it is important always to do in-depth research and be careful when making decisions in crypto investments, especially when implementing a hold strategy. Investing in crypto can present a large profit potential but will also involve high risks.
Are You Interested in Crypto Investment?
So, now you understand what hold is, the advantages and disadvantages, to the risks. Furthermore, if you are interested in investing in crypto, you can do it at INDODAX.
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