There are many people who hold on to their investments without losing their faith in crypto assets at any cost, whether they fall or rise or fluctuate in the market. This is called “HODL” for short. However, experts emphasize that the risks of this strategy should not be ignored.
Those who watched the Game of Thrones series will remember, we learned that in the last season, the name of the character named Hodor came from shouting ‘Hold the door’ at a critical moment. This moment both gave this character his name and provided an important development in the journey of other characters. There are many investors who set up their strategy like Hodor in Bitcoin and crypto assets.
There are many people who hold on to their investments without losing their faith in the crypto assets in their hands, no matter what it takes, whether it is up or down, and there are fluctuations in the market.
One of the key pillars of the ‘hold’ strategy is to avoid the losses of the volatile and volatile course of crypto assets in the short term. Instead of buying and selling the coins in their hands, investors may act in the direction of buying and holding, thinking that it will yield in the long run.
Although the name of this strategy, which crypto money investors call ‘HODL’, actually emerged with a typo, it was later used as an abbreviation of the phrase ‘Hold On for Dear Life’. However, this type of investment also has some risks.
If you see the drop coming, it’s okay to decrease the position”
Crypto assets, especially Bitcoin, have been following a fluctuating course, especially in recent days. Finally, after China banned financial and payment services institutions from trading cryptocurrencies, the value of bitcoin fell close to 30 percent. But longtime bitcoin investors are used to these ups and downs.
After the price approached $20K in 2017, Bitcoin experienced a great loss in value and fell to $3K in 2018. This means an 85 percent loss of value. Bitcoin, which also fell at the beginning of the pandemic, broke a record in this April, reaching $63K. It is claimed that even when Bitcoin hits the bottom due to the limited production of gold, it will earn its investor in the appreciation of its holding.
However, this may not apply to every coin. Sticking to the ‘hold’ strategy is the path to follow for any investment instrument. For example, if you held the Nasdaq shares in the 2000 collapse, you can make money today; or if you bought gold at $1,950 in 2011 because the Fed was printing money and watched it drop to $1040, it now comes to your cost.”
Experts explain that this situation is called ‘survivorship bias’. This is how an evaluation is made on the performance of investment instruments currently in the market, ignoring the lost funds, stocks or investment instruments. Accordingly, the general evaluation of a fund or a market index may cause exaggeration of its historical performance.
Therefore, Manukyan comments, “Most of the stocks traded on Nasdaq went bankrupt; they are no longer traded. Bitcoin or Ethereum can be held as they will continue to appreciate in the long run, but there are very few coins with this quality in 10,000 coins.”
Giving the example of silver, experts say, “Silver was $50 in 2011, now it’s $27. This means a significant opportunity cost in the intervening 10 years.”
Emphasizing that the same will be true for some crypto assets, Manukyan warns, “In short, if you see a decline, there is no problem in reducing your position. If you can’t, you need to hold quality crypto assets.”
“Selling at the right time is as important as buying at the right time”
The price of no asset can go up forever. It is as important to sell an asset at the right time as it is to buy it at the right time. The biggest advantage and disadvantage of this strategy in the crypto exchange is that you can double the money in one night or lose half of it. This is one of the issues that makes this strategy the most controversial. It is important for the investor to enter the right coin at the right time.
It cannot be interpreted as right or wrong to hold coins in the long term,” it is critical that all investments are not made in the same vehicle. “The investor can make a part of the money that he can allocate as an investment every month or at another time he determines by holding long-term coins. However, while investing, the entire investment should not be made in the same investment instrument. Risk distribution should be made by creating a basket.”
It should be known which crypto asset is invested and why. it is critical to know which crypto asset is invested and why. Some crypto assets are money, some are storage vehicles, some are representative of decentralized finance, so they have different features, It should be noted that all of the coins still mainly move in the same direction. Therefore, the investor one, the structure of the coin portfolio two, the structure of this portfolio in the main portfolio. should consider his weight well.
“Investment should be made not because the price is rising, but because the project gives confidence”
The news flow concerning macro developments and crypto markets may cause similar price fluctuations in all coins, but each coin has an exit purpose,” investing should be done not because the price of a coin is rising, but because its project gives confidence.
Investing should not be made with the money obtained or needed with credit and debt. The important point is to determine the right strategies according to the portfolio size and the maturity you plan to invest, rather than expecting miracles in the short term.
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