We had a discussion with @RealShillGates recently that made me reflect on the long inspiring HODL meme that dominates much of the Bitcoin culture.
For the longest time we have been a HODL zealot, in the last 4–5 years we squirreled away every extra dollar we could from my normal employment.
When I started buying Bitcoin, I had some $1,000 to my name in total assets.
I came of age to be investing in the tail-end of the financial recession of 2008. Like many my age my distrust of the stock market was high. Bitcoin was a try at something new and exciting. I kept buying, holding, watching and not reacting to the price. If I came into some extra money instead of buying food or going out I’d often throw another $50 dollars into Coinbase. It didn’t matter what the price was. I continued this as we went up to $1,000 for the first time, and back down to $200 bucks. Like many I started to play with how to increase my BTC holdings. I spent the year of 2013 and 2014 mostly in loss but continued adding to my position. I didn’t mind because I was only down a thousand dollars in USD.
I had watched all of the traders on Twitter, tried to slip into the Whalepool Teamspeak and understand what they saw in the tea leaves of the charts.
Trading required a lot more time than I had to give at that point in my life and I simply wasn’t ready to put in the time.
In many things in life people take the path of least resistance.
HODL on it’s surface made sense: Think long term, pay no taxes, and it was so stupid easy to do. Buy and forget. The market also moved with the slightest bad news or dark net market busts and ignoring the volatility was far simpler.
HODL still is not an easy path unless you commit yourself to the cult of Bitcoin. You do have to have a strong constitution and patience for the long term value premise of Bitcoin. Bitcoin’s short term volatility has decreased over time, but we obviously are near the bottom of a ~65% correction over the last six months.
HODL did work beautifully for almost everyone until December of last year.
December 17th …a morning not to forget.
My Bitcoin price ticker in my living room was at $19,000 as I was waking up and getting ready to leave for my day job. I stopped and stared at it for a good minute and a half. New all time highs had become hourly occurrences the last few weeks. Financially, I should have called out sick and sold a large portion right then and there.
My own euphoria blinded me.
$20,000 or higher seemed imminent. The only thought in my mind was: HODL. I didn’t want the fiat currency that I was purchasing these digital tokens to escape from. I was paralyzed by a drunken misspelling on the Bitcointalk forum.
I thought about selling for weeks even as we bounced around the $13,000 price point.
I’m not alone, many of us got rekt. Watching a small fortune disappear and get cut down hurts. I remember laughing and cheering as we broke down past $10,000 for the first time.
Looking back I don’t know if I was laughing as a form of therapy or if I was thrilled to add to my position.
My thinking has evolved on the idea of HODL.
The reality is that anyone who sold at $19,000 and waited until recently has tripled their position in Bitcoin. Ultimately, I want more Bitcoin as many of us do.
Taking profits is not giving up on Bitcoin, it’s using fiat currency as a mechanism to acquire more when the market isn’t frothing.
HODL at all costs can work in certain situations.
- If you don’t need the money and you consider your Bitcoin separate from your legacy investment portfolio. Early adopters mostly fall into this category. Volatility can be an amusement instead of a source of stress.
- You live in a country with currency problems (Venezuela, India, Congo, Nigeria)
- You have no desire to incur a taxable event.
- Direct control and sovereignty over your stored value is your top priority.
You do not need to be an expert trader with some simple realities at the front of your mind. This is what I’ve learned over the last six months watching Bitcoin.
- Take profits when a market is frothing (See:Dec 2017) irrational parabolic assets always come down eventually.
- Assets bounce, they trade in channels and wedges.
- Use limit orders they have cheaper fees and allow for greater precision to catch market dips.
- Whales have already acquired the coins you just heard about
- Markets bleed slowly and move money from the impatient to the patient
- Zoom out!
I’m speculating but Angelo probably sold near the top and set buys around $5000–$6000, and walked away. His tweets are few and far between. But they are often very on-point and age well.
I have zero doubts about the long term value of Bitcoin and I’ve continued to HODL …and buy through all the blood in the streets. I haven’t lost any sleep but as I’m sure many others have, I’ve meditated on my decisions in the past 6 months.
We’re now in a stage of information propagation in Cryptocurrency where good technical analysis tools are available and there are people all over the internet with information to help you learn. Often for free.
You don’t need to be a master trader, but no one ever lost money from taking profits to buy another day.
HODL is still a valid approach for some but educating yourself on the movements and psychology of markets will pay off for you in the long term more than anything.
When the markets are boring is the time to learn, read, and absorb more info so you are ready for the next spikes or dips. That is my current mission in my free time.
You can HODL on and continue staring at the price ticker on your phone looking for your next pulse of despair or dopamine.
Bitcoin will reward HODLers eventually. But you should take opportunities to increase your holdings if you see one and have an exit strategy.
Fortune favors the bold.