The word "hodl" has probably come up at least once in the context of cryptocurrency investing. It first appeared in an old bitcointalk post, where the poster announced that he would hodl his bitcoins regardless of market conditions. The term went viral almost instantly.
Knowing when to hodl is the right choice for any investor, new or experienced, large or small, is critical to making money. This necessitates a deeper understanding of crypto trading, which varies from conventional stock markets. So, what is the right time to hodl for any investor?
Prior to The Native Blockchain's Industry Improving Action
Each crypto asset is backed by a blockchain ecosystem that keeps it running. This ecosystem is likely to take steps that raise investor confidence and market analyst expectations for its native asset. It is beneficial to be mindful of such behaviour.
The behaviour may be a significant improvement for the blockchain ecosystem. Such upgrades are almost always preceded by a public announcement of their progress and expected release date. The Ethereum 2.0 update, which had its testnet released on April 18, 2020, is a good example.
It included a major infrastructure upgrade, increased scalability and speed, and a switch to a consensus protocol. The upgrade aided in raising the value of ETH, the native coin, from $215 in April 2020 to the current $1,800 range. In the long run, hodling after a glimpse of a big blockchain update pays off. Other blockchain actions are ecosystem-specific.
The 2020 Bitcoin halving case, for example, has propelled Bitcoin's value to new all-time highs. Since the halving event occurs on a regular basis, any investor who wants to profit from it will predict it. The finite number of bitcoins available causes this, making mining more capital intensive.
The end result is that the coin's market price increases. Holding an eye on the blockchain environment means that any move that benefits market values is never ignored. Many groups and online communities are full of seasoned holders who are still up to date. An investor who enters one is kept up to date.
In the event of such action, continuing to hodl is one of the most lucrative moves one can take in the long run.
When Dip Investors Pump in Investments
Dip investors are those who make large investments in a crypto asset during a bear market in the hopes of a price recovery. Prices tend to rise as a result of the behaviour of these dip investors, especially the larger ones.
Market analysts join the fray by expressing a clear optimistic view on the behaviour of these dip investors.
Professionals, and often even analysts, are popular among such investors. Their investment risks are normally well-considered, and they often make good returns. The market could have been bearish for a long time, with the asset losing considerable value.
Huge interest and increased activity from dip buyers, on the other hand, is a sure sign of a turnaround. The most profitable action is hodling.
If Whales Continue to Hodl or Increase Investments
Whale investors are those who invest large amounts of money in the cryptocurrency industry. Institutional investors or Ultra-High Net Worth Individuals may be among them (UHNWI). They have a lot of liquidity in the cryptos they invest in because of their large investment reserves.
By their actions or remarks, investors have the potential to control market conditions. It thus pays off handsomely to keep track of any whale investors' activities in a cryptocurrency in which one has invested. If a whale investor stays put, it might be prudent to continue hodling whether a crypto value has made remarkable gains or has had a bad result.
Professional traders and fund managers always direct whale investors' portfolios, and they always make measured moves. An rise in their coin investments is an even more certain reason for them to keep hodling. To say the least, it's an indication that the asset will see a significant increase in value in the near future.
Following a Pullback After a Sustained Bullish Market
Cryptocurrency trading, like every other financial market, has its ups and downs. The key is to understand what these movements imply. Is this a mild retracement or the start of a long-term bearish trend?
A detailed analysis of the views of renowned market experts goes a long way toward offering a credible image of what it is. If the majority of them are optimistic in a sharp turn to the bull market, hodling is the best course of action. It was just a modest reversal.
It's also critical to figure out what's causing the drop. If it was triggered by a security breach that was quickly resolved by the blockchain's technical team, a revival in price gains is likely, rendering this a minor pullback. It's a safe idea to keep hodling.
Furthermore, assessing the market situation aids in distinguishing a pullback from the start of a long-term bearish trend. When the value drop begins to level off, and there hasn't been any large-scale selling by other investors, it's time to expect a pullback. The decreasing price drops could indicate a short-term price benefit, providing a strong incentive to hodl.
Final thoughts
Hodling necessitates persistence and observation, since the rewards may be immediate, medium-term, or long-term. Some hodling decisions favour fast, short-term gains followed by incremental, longer-term gains, such as following a minor pullback. Continued hodling after dip buyers join often ensures short-term profits.
If the price was still rising, continued hodling in response to similar activity by whale investors could result in immediate profits. However, if the asset's value was declining, it would have medium-term benefits.
Hodling in reaction to constructive action in the blockchain ecosystem has important long-term benefits. When one makes progress is decided by the acts that trigger their hodling.
